The Purpose of the Automatic Stay
When filing a bankruptcy petition with the court, debtors are frequently not completely aware of the rights the bankruptcy code gives them. One of the most significant rights is the ability to be exempt from creditors’ collection efforts after the bankruptcy petition has been filed. An automatic stay is important because it stops creditors from continuing to try and collect a debt at the same time, the bankruptcy petition is being processed in the court system. It allows the debtor to carry less of the burden of accumulating debt.
Reasons the Automatic Stay is So Important
It’ll keep your lights on. The automatic stay will stop the disconnection of your utilities for at least 20 days. Your utility company cannot threaten to cut off your water, electric, gas, or telephone service because you are late on a bill. Although the cost of a power payment alone rarely makes filing for bankruptcy a good idea, it might if you have other debt you can discharge. Be aware that the utility company can ask you for a deposit to guarantee future payments.
It’ll Keep You in Your Home. The automatic stay may be helpful if you are being evicted from your home, but it is typically only temporary. The automatic stay won’t impact these eviction proceedings if your landlord already has a judgment of possession against you at the time of filing; the landlord can carry on as usual. The automatic stay won’t help you much if the landlord claims that you have been harming the property or using illegal substances there. In other situations, the automatic stay may give you a few days or weeks to move out, but the landlord would likely ask the court to lift it and permit the eviction, and the court will probably grant his request.
It’ll Stop Garnishments. When you file for bankruptcy, most garnishments are immediately stopped. You can erase eligible debt through bankruptcy, such as credit card obligations and personal loans, and receive your total wage. Be careful that debts frequently garnished—like those for continuing alimony and child support—won’t be forgiven. Depending on the bankruptcy chapter filed, past-due child support and back taxes will vary.