For a lot of people, the best way to lose debt is bankruptcy, but you don’t have the choice of going bankrupt when you are in debt, and this where an automatic stay comes in, it prevents those you owe money from trying to collect, and we will learn all about them below.
What are automatic stays? This is a ruling that automatically takes effect immediately after the client files for bankruptcy. It comes to play when creditors begin to chase after you to collect debts owed. An example, If I am past my mortgage payment or can’t pay for my car if I then file for bankruptcy, my creditor cannot kick me out and foreclose my home or take away the vehicle.
There are two major forms of bankruptcies that allow an automatic stay. One is the Liquidation bankruptcy where the debtor’s possessions are sold to pay back the debt they owe. The next one is a reorganization bankruptcy, in this case, your possessions are not sold off, but you are left bankrupt until your repayment of debt is done. In both cases the Automatic stay allows you to fix your debt status before the creators try to collect their debt.
Types of debt that the automatic stay covers
Some debts covered by the automatic stay include:
· Foreclosure: An automatic stay prevents the creditor from foreclosing your property, allowing you to keep the house for as long as your bankruptcy case is still active,
· Some eviction: You might be given brief aid, but in a lot of cases the landlord can keep on with the eviction dealings
· Services: An automatic stay stops your services such as light and water from being shut off for at least twenty days.
· Wage Garnishment: An automatic stay will put a hold on wage garnishment, dependent on the type of debt, it could be cleared in bankruptcy.
How long does an automatic stay last?
An automatic stay lasts as long as your bankruptcy file is active. Depending on the type of bankruptcy, it will determine how long your automatic stay lasts. For liquidation bankruptcy, usually lasts a few months, but for reorganization bankruptcy, it could last for as long as five years. Though, if you have had a different bankruptcy case cleared within the previous year, the automatic stay will only last for one month. And if you have cases that are yet to be dealt with, then you may get no Automatic stay completely.
And if the automatic stay is lifted?
Seeing as the entire point of an automatic stay is to keep your creditors and lawsuits at bay, lifting the stay or closing your case means that you’re up for grabs again and they can come to collect. Creditors can also file a motion for the automatic stay to be removed even while your case is still active. If your creditors can prove that the stay is causing harm to their company/business then they can get the stay removed.
In conclusion, Automatic stays are a great tool to help you rebuild and recover from bankruptcy, and above we have provided the information you will need to understand how it works and how to use them properly.