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What Is the Automatic Stay and How Will It Affect Me?

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Preparing for a bankruptcy proceeding can be a stressful time. There are many considerations to make, and because every bankruptcy case is unique, there are few one-size-fits-all solutions.

What Is the Automatic Stay and How Will It Affect Me?

This is also a time filled with optimism and hope for a brighter future, free from debt and the stress that accompanies it. If you’re thinking about moving forward with bankruptcy, it’s important to understand how the process works and what to expect. Working with skilled Jacksonville bankruptcy lawyers can make your journey far easier to navigate.

What Happens to My Debt Once I’ve Filed for Bankruptcy?

One of the first things that happen when you file for personal bankruptcy is known as an “automatic stay.” This is a type of federal injunction that temporarily prevents most creditors from continuing to pursue collection on existing debts.

The automatic stay is one of the most popular reasons to file a bankruptcy claim. In many cases, individuals plagued by debt have been subjected to heavy-handed and seemingly continuous debt collection efforts. This can be incredibly stressful, and usually does nothing to help the debts get paid.

A temporary stay gives debtors a bit of breathing room, as well as time to make informed decisions about how to proceed without the stress associated with ongoing debt collections. In some ways, a temporary stay gives debtors equal standing with their creditors, allowing a degree of freedom to chart a new financial course without undue (and ineffective) pressure.

What Are the Limitations of an Automatic Stay?

It’s important to realize that an automatic stay does not act to eliminate debts. It simply gives the debtor more time to create a plan without being hassled by collections efforts.

Once your bankruptcy case is filed, creditors are given the notice to cease all debt collection efforts. You can expect a swift end to phone calls, letters, and emails demanding that you make good on one or more financial obligations.

What Kinds of Practical Benefits Come With an Automatic Stay?

Freedom from stress is a powerful motivating factor in filing for bankruptcy. However, there are plenty of practical reasons to seek an automatic stay.

Eviction

If you are already in the process of being evicted from your home, an automatic stay may not deliver an end to that process. Once a landlord has achieved a judgment of possession against you, filing for bankruptcy after that point will not prevent eviction from taking place.

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Keep in mind that your landlord can always approach the court to ask that an automatic stay be lifted to allow an eviction. Courts tend to honor these types of requests, so you might only buy a handful of days or weeks before the eviction resumes moving forward.

Utility Disconnection

Having your lights, phone, gas or water disconnected can be a big hassle. Once you file for bankruptcy, collections on those types of accounts will cease.

This pause may be temporary, but it does give you more time to come up with a workable solution that is fair to all parties. You might also consider adding unpaid utility debts into your bankruptcy filing. While these debts are usually nowhere near as significant as a consumer and other debts, they can add up.

Foreclosure

If you are on the verge of losing your home, certain bankruptcy filings can help. Chapter 13 bankruptcy will usually allow you to catch up with past-due house payments over time. With Chapter 7 bankruptcy, however, there is no path that will allow you to remain within your home. In that case, whatever relief a temporary stay brings can be short-lived.

Wage Garnishments

If you’re living with a wage garnishment, you understand just how hard it is to make ends meet when a portion of your paycheck is being kept from your possession. Once you file for bankruptcy, however, most garnishments will come to a complete halt.

There are cases in which bankruptcy cannot prevent wage garnishment. If your payment is being tapped for child support or alimony, filing for personal bankruptcy won’t make those obligations disappear. Child support and alimony will also not be discharged as part of the bankruptcy procedure, so you’ll need to figure out a plan for working those payments into your budget.

What Kinds of Payments/Proceedings Won’t Be Affected By an Automatic Stay? 

While a powerful tool for reducing stress during your bankruptcy, there are limits to what an automatic stay can accomplish. Knowing what to expect is essential to having a positive experience during bankruptcy.

An automatic stay will do nothing to protect against:

  • Certain tax proceedings like an audit or determination of deficiency
  • Criminal proceedings and court fines
  • Repayment of loans drawn from a pension
  • Multiple bankruptcy filings

It should also be noted that creditors always have the right to ask the bankruptcy court to lift an automatic stay. Not every request will be honored, but courts are likely to seriously consider requests involving foreclosure, a lawsuit in a different county, or disputes between landlords and tenants.

When asking for a stay to be lifted, creditors must demonstrate that allowing an automatic stay to remain in effect would lead the creditor to lose money while causing no harm or benefit to other creditors.

Have Additional Questions About What To Expect When Filing for Bankruptcy?

If you have additional questions or concerns about what will happen is and when you file for bankruptcy, the best way to gain clarity is to work with Jacksonville bankruptcy lawyers who have the skill and experience needed to address all of your concerns.

Bankruptcy proceedings require a team and having a trusted legal advisor on your team is essential to reaching a favorable outcome.

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