When you file for bankruptcy, you get an automatic stay. This federal court order prohibits your creditors from contacting you to collect the debt.
If you struggle with unpaid bills and have considered bankruptcy, learn more about the potential benefits of an automatic stay. With this process, you can eliminate the creditor calls that become constant when you become overwhelmed with debt.
How an automatic stay works
The automatic stay takes effect as soon as you file for bankruptcy. The court notifies your creditors of the filing and provides other pertinent details. The lenders cannot contact you or take steps to collect the debt, including but not limited to repossessing property, having a sheriff sale, foreclosing on real estate, garnishing your wages, or suing you.
Limits of an automatic stay
An automatic stay does not apply to every debt. Even if you file for bankruptcy, you still must pay court-ordered child support or spousal support. You must also repay existing legal judgments against you.
If you decide to keep your home or vehicle in bankruptcy and do not make payments as agreed, the lender can ask the court to lift the automatic stay. With permission, they can resume collection actions, which puts your financial stability at risk.
The automatic stay lasts until the court discharges your bankruptcy case, which varies depending on the type of bankruptcy. If you file bankruptcy more than once in a single year, the automatic stay will expire after 30 days.
You can take legal action if a creditor continues to contact you after you file for bankruptcy.