Don’t underestimate the power of bankruptcy’s automatic stay. That’s the federal law that stops your creditors from pursuing you, your money, and your possessions at the moment your case is filed.
In a couple of my recent blogs, I told you about the relatively rare situations in which the automatic stay does not apply—situations in which certain special creditors, or sometimes even all creditors, can continue attempting to collect their debts. But let me emphasize again–the vast majority of the time, as soon as your bankruptcy case is filed, all creditor efforts against you and your property come to an immediate stop.
The automatic stay is so powerful because it is 1) fast and 2) very broad in what it covers.
Very few legal procedures are as quick and efficient as the automatic stay. To get anything done in just about any court usually takes weeks, months or even years: Usually a complaint or motion needs to be filed, the other side has the opportunity to respond, then there may be a hearing of some sort, and finally the judge makes a decision.
But not with the automatic stay. It is a one-sided and immediate court order, which goes into effect immediately upon filing the bankruptcy case. A judge isn’t even involved. The creditors have no say about it. There IS a procedure for creditors to object and ask the judge for “relief from the automatic stay,” (for permission to continue or start pursuing you or your money or property), but that’s after the fact. The automatic stay gives you an immediate breathing spell, whether your creditors like it or not.
This breathing spell protects you in just about every possible way from your creditors. It stops all phone calls and letters—“any act to collect, assess, or recover” a debt. The automatic stay stops all court and administrative proceedings against you from starting or continuing. It doesn’t matter if your case is filed two minutes before the start of a civil trial or the foreclosure of your house, the trial or foreclosure does not happen. If a creditor is about to garnish your wages or checking account, the garnishments are stopped. If you’ve fallen a couple months behind on your car loan and the repo man is in your employee parking lot, the automatic stay sends him away empty-handed. If the IRS is about to record a lien against your house, the automatic stay stops the tax lien.
This IS powerful medicine.
As with other strong medicine, it should be administered with the right guidance, and with help for dealing with any potential side effects. Stopping your creditors with a bankruptcy will essentially be the end of the story for most of them. But for other creditors—those with rights against your house or car, or with special kinds of debts like taxes and student loans—the breathing space gives us the opportunity to deal with these special creditors.
Feel free to contact me to get the immediate protection you need, along with long-term financial solutions for dealing with all of your creditors.