Bankruptcy is a tool that can assist various individuals in certain financial strains. While it was once looked down upon by many, filing for bankruptcy is becoming more acceptable amongst various groups of people.
An automatic stay is a component of the bankruptcy process that can be helpful in relieving the stress of bill collections during proceedings. Understand a few important aspects of this special tool.
In short, an automatic stay is an injunction that prohibits certain bill collectors from continuing collection actions against a party during the bankruptcy process. Depending upon the type of bankruptcy, this may eliminate collection attempts temporarily, or it may contribute to a permanent stop on collection for a certain debt. In some cases, the automatic stay automatically applies, while in others, the filer must petition for the courts to grant the injunction.
What it can help
There are a few different types of bills an automatic stay may apply to. Some of the most common ones include:
- Utility bills
- Wage garnishments
- Public benefit overpayment collections
- Evictions or foreclosures
In each case, the amount of time and extent of the prohibition may vary. It is important to understand the terms so that you may plan your available finances accordingly.
What it will not help
An automatic stay will not help stop or defer certain debts. Understanding these stipulations is critical to ensuring you do not suffer from any of the downfalls of buying into a bankruptcy myth. These include tax proceedings, pension loan repayments and collections from a previous bankruptcy filing. Certain legal proceedings, such as criminal charges or paternity testing, are not affected by an automatic stay.
An automatic stay can be quite beneficial, if it is applicable to your situation. Take some time to evaluate if your collections qualify, and take the necessary steps to secure it during your bankruptcy process.