When you choose to file for bankruptcy, one of the advantages is that you will receive an automatic stay on all collection activities. If you want to know how this aspect of your bankruptcy might benefit you, it's a good idea to discuss it with your bankruptcy lawyer.
Why Bankruptcy Comes with an Automatic Stay
The purpose of the automatic stay is to make sure that each creditor is treated equally. While some debts are prioritized in a bankruptcy, such as back taxes, bankruptcy is supposed to give creditors an equal opportunity to receive a portion of your assets.
The Benefits of an Automatic Stay
You will also benefit from the automatic stay because you will not have to worry about receiving harassing phone calls or being contacted by your creditors in any other way. Instead, you will interact with the creditors through the bankruptcy process.
The automatic stay only applies to debts you have acquired before filing for bankruptcy. It does not apply to certain types of actions such as repossessions, evictions, and foreclosures except under certain circumstances. You will also be able to halt the shutting off of your utilities for a period of time. There are various other situations that might not be affected by an automatic stay and your bankruptcy lawyer will be able to go over all of these with you.
How Creditors Can Stop an Automatic Stay
A creditor can try to argue that the automatic stay should be lifted under some circumstances. For example, if you have a secured debt and the debtor argues that you have deliberately reduced the value of the asset used as collateral for the secured debt, this might be used to lift the automatic stay.
A creditor might not agree with the automatic stay and has the right to file a motion with the court to have it revoked. This can normally only be done by a creditor of a secured loan such as an auto lender.
The Court Ultimately Decides
To be able to fully benefit from an automatic stay, you will need to have the court on your side. For this reason, you'll need a bankruptcy attorney to be managing your case. The automatic stay might be lifted if the judge would like to proceed with a particular action such as if your ex files for divorce after you have filed for bankruptcy. Otherwise, if you complete the bankruptcy process, your creditors will no longer be allowed to collect the debts you discharged.
For more information, contact a bankruptcy attorney near you.