An Experienced Lawyer You Can Count On

What is the automatic stay in bankruptcy law?

On Behalf of | Jun 13, 2022 | Bankruptcy |

There are many valid reasons Indianapolis residents file for bankruptcy. Debt affects almost all of us in some way or another, and in today’s world, one unexpected event can cause a financial catastrophe.

Once you start getting behind on bills, you are likely to immediately start receiving threatening calls and letters from debt collectors. Creditors can be relentless when it comes to trying to collect their debt, and you may feel harassed and overwhelmed, at a time when you are already stressed and struggling.

Creditors can no longer contact you

The end of creditor harassment is one of the many benefits of filing for bankruptcy. Once you file for bankruptcy, something called the automatic stay is triggered. The automatic stay notifies your creditors that you have filed for bankruptcy and orders them to immediately cease all contact with you.

The automatic stay is temporary, but it is powerful. Legally, it operates the same as any other type of injunction, with creditors facing penalties if they violate it by contacting you.

How long does the automatic stay last?

The automatic stay lasts until your bankruptcy case is closed. In a Chapter 7 bankruptcy, which eliminates all your eligible debt, your case is closed within 3 to 5 months. A Chapter 13 bankruptcy, which involves making payment arrangements to creditors, may not close for 3 to 5 years.

A creditor may file a motion to lift the stay; however, they must prove that their entire business will be damaged if they cannot collect your debt or that you do not have enough assets to cover their estimated costs after bankruptcy. Decisions to lift are not always successful since these things can be hard to prove.

Additional benefits of the automatic stay

The automatic stay can bring you major relief and provide the breathing room you need to complete your bankruptcy and start fresh. It can help prevent foreclosure or eviction and stop wage garnishment. An automatic stay also stops utility companies from shutting off your utilities for at least 20 days.

There are some debts an automatic stay does not cover, such as child support payments or any monetary penalties from a prior criminal conviction. An experienced bankruptcy attorney can evaluate your financial situation and advise you on what will happen to each of your debts.