If you have debts, you may know how stressful it can be when creditors and bill collectors pursue you. The more debts you have, the more creditors will be knocking on your door, which is an overwhelming problem. However, you can stop their collection efforts with the automatic stay if you file for personal bankruptcy.
Automatic temporary stay
If you file for bankruptcy and the court approves your case, they will put you on a temporary automatic stay. This means that creditors, collection agencies or government entities won’t take action against you or your property. Some actions that automatic stay can prevent are:
- Debt collection
- Tax liens against income or property
- Wage garnishment
The debts need to have been acquired before filing for bankruptcy for the automatic stay to be effective. To get protection against these actions, the bankruptcy clerk will contact all your creditors and inform them that you are on automatic stay.
There are some situations in which automatic stay cannot protect you. If you owe money for civil actions or proceedings, like alimony and child support lawsuits, you will need to pay these to stop the creditor’s efforts. An automatic stay won’t help you either in some tax proceedings and wage garnishments if you took a loan against your pension.
A creditor’s defense
There are many situations in which a creditor can obtain relief from the automatic stay and resume their collection efforts. To do so, the creditor must file a Motion for Relief and must prove to the court one of the following:
- There is a lack of protection of an interest or property
- The debtor does not have equity in a property, and they don’t need that property for an effective debt reorganization
- The creditor has an interest in a single asset real estate
- The filing of bankruptcy was part of a scheme to delay, hinder or defraud creditors
A creditor needs to have proof for the court to grant them relief from the automatic stay.
Protecting your rights in bankruptcy
The automatic stay will last until your case is closed or dismissed. This will give you enough time to reorganize your debts and repay as many creditors as you can. If a creditor or debt collector violates their automatic stay, you can sue them and recover any damages.
Bankruptcy as a solution
Filing for bankruptcy may not protect you against all creditors. Still, it may be the best solution if you have overwhelming debt. With bankruptcy, you can find a way back to a stable financial life and start anew. That way, you won’t have to worry about those creditors knocking on your door anymore.