For many people, bankruptcy is a way to regain control of their finances. A crucial part of this involves the automatic stay. This is an initial injunction that stops creditors from taking further action against you while a court determines whether your case qualifies you for bankruptcy. The biggest benefit of an automatic stay is that creditors stop contacting you about paying back your debt. That means no more phone calls at all hours of the day, which brings a tremendous amount of relief.
It may not happen immediately, but an automatic stay aids the bankruptcy process. Here is what you need to know about automatic stays, so you can better understand the process as a whole.
What else does an automatic stay prevent?
In addition to stopping creditor phone calls, automatic stays also prevent your utilities from being cut off for a minimum of 20 days. In the event your home is at risk of foreclosure, the automatic stay will half that process. If an entity has already begun garnishing your wages, then an automatic stay halts those garnishments, allowing you to retain more of your money. It also prevents you from losing money if you received an overpayment for a public benefit. Finally, it can help during an eviction if your landlord has already taken action to get you out of your home.
What can an automatic stay not do?
Automatic stays do have limitations, and you will not be exempt from all financial obligations during this time. The IRS is still able to audit you during this time, so you still need to pay your taxes and comply with any procedures set forth from the IRS. Additionally, if you engaged in any criminal proceedings before or during the bankruptcy, the automatic stay will not help you there. It is a useful tool, but you need to know how to navigate the bankruptcy process thoroughly to get out okay.