How can an automatic stay help you?

On Behalf of | Dec 17, 2021 | Bankruptcy |

When you’re considering bankruptcy, something that you should look into is the automatic stay. An automatic stay temporarily prohibits creditors and collection agencies, as well as others, from pursuing you for money owed while you pursue bankruptcy.

An automatic stay helps you avoid being continuously harassed and contacted about your debts so that you can take time to think about the steps you want to take next. This is a normal part of bankruptcy that can help you get much-needed relief from unwanted contact.

One of the primary objectives of an automatic stay is to make sure all of the creditors have the same potential access to your assets in bankruptcy. Creditors are unlikely to get the full payment amount owed in bankruptcy because the bankruptcy almost always guarantees that they’ll get proportional shares based on the assets given up in a Chapter 7 case.

Creditors do have the right to petition for the automatic stay to be lifted. This is rarely allowed unless the creditor can show that the value of the property will drop while the bankruptcy is ongoing.

When does the automatic stay go into effect?

An automatic stay goes into effect immediately after you file for bankruptcy. The provisions of an automatic stay protect you against certain actions from the people attempting to collect a debt. For example, they may no longer contact you once they know you’ve filed for bankruptcy. They must stop trying to foreclose on a property and should stop all repossession actions.

What can you do if you’re still being contacted after you enter into bankruptcy?

The first time a creditor or collections agent reaches out to you, you should tell them to contact your attorney’s office and explain that you are in bankruptcy. They may not yet have been informed that your case went into bankruptcy, which would explain the initial call.

After you give them this information, the calls or other methods of contact, like letters, should stop. If they do not, then you may have the right to sue them for violating a federal law and your right to its protections.