The automatic stay is one of the benefits of bankruptcy protection that can provide near- term relief while the bankruptcy process itself can provide long-term debt relief. Because of the advantages of the automatic stay and personal bankruptcy protection, consumers seeking debt relief should be familiar with both.
What the automatic stay can help with
The main purpose of the automatic stay is to stop creditor collection actions during the bankruptcy process. Creditors are prohibited from pursuing collection actions once the automatic stay is in place which occurs when they file for bankruptcy protection. The automatic stay can stop creditor collection actions including:
- Wage garnishment: The automatic stay can stop the filing party’s wages from being garnished while it is in effect.
- Stop utility disconnection: The automatic stay can stop the filing party’s utilities from being disconnected for at least 20 days.
- Stop eviction or foreclosure: The automatic stay can stop foreclosure proceedings and may be able to delay eviction proceedings while personal bankruptcy protection may be able to provide longer term solutions.
- Stop the government from seeking repayment of public benefits: The automatic stay can stop the government from seeking repayment of overpayment of public benefits from the filing party.
If creditors pursue collection actions during the automatic stay, their collection actions will not be valid because the filing party is protected from them. Calls and letters from creditors can be overwhelming when the filing party is struggling with debt which is why the protections of the automatic stay are so important to be familiar with.