When bills mount and nonstop calls from creditors overwhelm you, you may not know how to reduce your financial stress. Many times, seeking debt relief seems inevitable. However, some indebted consumers do not understand how filing bankruptcy can provide immediate peace of mind through an automatic stay.
The United States Bankruptcy Code prohibits most collection agencies, creditors and government entities from collection efforts once you file bankruptcy. In essence, these regulations protect you from actions such as foreclosure, repossession and eviction.
As you consider your options for regaining financial freedom, you would be wise to learn how an automatic stay affects debt collection.
Five collection activities prohibited by an automatic stay
The automatic stay does not affect criminal matters or the enforcement of police power. The automatic stay also does not apply to tax liabilities or confiscated tax refunds that are applied to past-due child support or spousal support.
However, when you file bankruptcy, an automatic stay can protect you from:
- Home foreclosure
- Vehicle repossession
- Wage garnishment
- Apartment eviction
- Tax levies
An automatic stay can also protect you from lawsuits.
Getting relief from collections efforts may also allow you to hold creditors accountable if they do not obey bankruptcy laws. Deliberate violations of an automatic stay may enable you to recover damages.
Consider your options
Bankruptcy can give you a clean financial slate, though the protections included are complex. Exploring your options can help you understand not only how bankruptcy works, but also whether now is the time for you to file.