Automatic Stay in Bankruptcy
Immediate Relief from Adverse Creditor Actions
Many people who owe large amounts of debt begin to feel desperate about protecting themselves and their families against creditor actions to recover bad debt. Staying current on your debts can be a considerable challenge, as you scramble to make ends meet and enjoy an acceptable standard of living while also trying to save the money every month to meet your mortgage payment. Always hanging over your head is the ever-present risk that you will fall behind on your mortgage, miss a car payment, or be unable to pay your utilities, with the result that you will be threatened with the possibility of adverse creditor actions against you.
When you go into default on a debt, whether it is the mortgage on your family's home or if it is a department store line of credit for a home appliance, the creditor has a right to take legal action against you to recover payment of the debt.
Here are some important things to know:
- The first step in this process is normally to foreclose on the property which is pledged as collateral for the loan, and to repossess this item so that it can be resold at auction in order to satisfy the outstanding debt.
- Another possibility is that you will be sued in debt litigation: In the event that you lose, the court will most likely award a debt judgment against you, which the creditor can use to obtain a wage garnishment against you or perhaps a lien on your property.
- In any event, the consequences of defaulting on a loan can be disastrous for you and your family, with the possibility of losing your car, being forced out of your home, and perhaps having your wages garnished by up to 25%.
How Does Bankruptcy Help?
Fortunately, you may have a way out of this stressful situation. By declaring bankruptcy, you may be able to get rid of most or perhaps even all of your debts, giving you a fresh start financially. Even better, you do not have to wait until your bankruptcy case is completed. A Chapter 7 bankruptcy usually takes a few months to carry out, while a Chapter 13 case extends for a period of three or five years, but the debt relief provided by the U.S. Bankruptcy Code is available from the outset of the process. This is due to the fact that as soon as you file your petition to declare bankruptcy, you will enjoy the protection of an automatic stay against further adverse creditor actions.
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The automatic stay is a legal injunction which prohibits your creditors from doing anything more to collect the money that you owe them. It is a powerful and sweeping way to put an end to wage garnishment and repossession, and it can even be used to stop foreclosure. An automatic stay remains in effect for the duration of the case, whether the debts are discharged at the conclusion of the bankruptcy or if the court dismisses the petition for bankruptcy. It does not apply to certain debts – for example, a wage garnishment for collecting unpaid child support will not be affected – but it is effective against most debts. With the automatic stay, you can very quickly protect yourself and your family against your creditors and debt collectors in addition to achieving a level of security and peace of mind which you may not have experienced for some time.