Because of the various stigmas that surround bankruptcy, it can often be easy to forget that bankruptcy is a form of financial protection for the person who files it. Bankruptcy can potentially keep you from losing your home, business, vehicles, or other possessions, if used properly. Depending on your financial situation, it can protect you in many ways. The first way it usually protects you is with an automatic stay. But what is an automatic stay in bankruptcy?
How Does the Automatic Stay Work?
You can benefit from an automatic stay in both Chapter 7 and Chapter 13 bankruptcy. Because it is automatic, it kicks in as soon as you file your bankruptcy with the court. The main benefit of an automatic stay is that it prevents your creditors from pursuing almost any form of debt relief against you once the process begins.
As the name suggests, an automatic stay happens automatically as soon as you file your paperwork. You don’t need to request one, and it doesn’t need to be approved by the court.
To best take advantage of an automatic stay, you need to provide the court with as much information as possible. This means that you (or your lawyer) should do extensive research before you file for bankruptcy. You should list every creditor you have on your bankruptcy forms. If you miss a creditor, intentionally or not, they will (at least temporarily) be unaffected by the automatic stay.
This is because of how the automatic stay works. When you file for bankruptcy, the court contacts every creditor that you listed in your paperwork and informs them that you are protected by an automatic stay. If you omit any creditors, they will likely continue to contact you even after your bankruptcy process has started. At best, this means you will receive collection notices. It can be a lot worse, though. Thankfully, if you missed a creditor, you can enforce the stay by informing them that you filed for bankruptcy and giving them the case number so they can verify that information.
Protection from More Than Just Collection Notices
Collection notices aren’t the only things that an automatic stay prevents — it is much more comprehensive than that. It prevents any additional action by a creditor on a debt. This means that your creditors can’t . . .
- Foreclose on your house or even begin foreclosure proceedings
- Evict you unless the court lifts that part of the stay
- Disconnect your utilities for at least 20 days
- Collect overpaid public benefits
- Garnish your wages, unless it is for child support.
The best part of the stay is that it typically lasts until your bankruptcy case is resolved. This means that you won’t lose your car, your home, or other property until at least the resolution of the case.
Are you in financial straits? Bankruptcy protection may help you keep the property and assets that are most important to your family. Contact Lewis Roberts, PA today at (407) 749-0080 to learn more about your legal options.
Consequences for Violating the Automatic Stay
The courts do not look kindly on a creditor that violates the automatic stay. If an informed creditor contacts you in any way or attempts to further any part of the debt collection process, the court will typically punish them.
However, in many bankruptcy proceedings, creditors don’t get any meaningful compensation anyway. Thus, simply denying them compensation may not be enough to prevent this type of action in the future. Thankfully, the court has other tools at its disposal. The court can penalize the creditor with monetary damages awarded to the debtor in bankruptcy.
Typically, the only defense against violating an automatic stay is ignorance. If the creditor can prove that they were never informed that bankruptcy proceedings had started, they will likely avoid punishment. However, even if they were ignorant, the creditor may be required to reverse actions taken once the stay began.
Benefits of an Automatic Stay to Creditors
Curiously, creditors have a reason to respect automatic stays other than the possibility of suffering penalties. An automatic stay also offers a benefit to creditors. When an automatic stay kicks in, every creditor must immediately cease action on any debt collection process. This means that every creditor is on an equal footing. Even better, if a creditor has been informed of the automatic stay, they know that the debtor has acknowledged the debt they owe the creditor.
The creditor needs to do less work to get any compensation that might be forthcoming from the bankruptcy process. On the other hand, if a creditor isn’t informed of an automatic stay, they will have to file paperwork with the court to prove that they are a creditor, and they may not get involved in the process until it has been underway for some time.
Contact Lewis Roberts, PA Immediately to Get the Most Benefit from an Automatic Stay
If you are considering any form of bankruptcy, the protection you get from an automatic stay may be significant. But an automatic stay is only as good as the information that you provide to the court. For many debtors, determining exactly who they owe money to is extremely challenging.
My law firm has extensive experience tracking down creditors and determining precisely what financial situation clients are in before they declare bankruptcy. I will make sure that every creditor is informed of your decision to file for bankruptcy and that the automatic stay provides you with as much protection as possible.
No one should ever try to file for bankruptcy without being represented by an experienced bankruptcy attorney. If you are considering filing for bankruptcy in Florida, contact my law firm at (407) 749-0080 to schedule a free consultation as soon as possible.
Attorney Lewis Roberts
The weight of debts that one cannot pay carries financial stress into every waking moment. It is time for this to end. Lewis Roberts, PA, offers solutions to relieve these worries. With over 20 years of experience in helping individuals overcome the burden of debt, bankruptcy attorney Lewis Roberts presents a range of options tailored to each unique situation. Clients can trust his advice on any matter related to debts, as he identifies appropriate options and explains the paths to debt relief clearly and carefully. This ensures that clients make the best decisions for their future. [ Attorney Bio ]
