When your debts start piling up, it can feel like the walls are closing in on you. If you’re worried about how you’ll make it long enough to enjoy the long-term benefits of bankruptcy, know that there are some short-term benefits to get you there.
An automatic stay can hold off some of the immediate issues knocking on your door. The stay can begin the moment you file for bankruptcy. It may give you some instant breathing room as you navigate the bankruptcy proceedings and hold debts at bay until they’re discharged, depending on the nature of your obligations.
Staying power
Automatic stays can slow down or even halt some proceedings while you deal with bankruptcy:
- Collection: Any debts you incurred before you filed could be put aside for the time being. A stay could keep creditors, collections agencies and some government entities at bay while your bankruptcy proceedings play out.
- Foreclosure: If you can’t keep up with your house payments, you may be facing foreclosure. Putting a stay in place could freeze the process, and likely leave the future of your home up to the chapter you choose for bankruptcy.
- Eviction: Going this route to postpone an eviction could buy you the days or weeks you need to get your things together and find a new place. The stay may not last beyond that since the landlord can continue with the eviction process and then ask the court to lift to stay.
Less automatic
The automatic stay may buy you some time, but there are usually things that don’t fall within the power of an automatic stay:
- Taxes: The IRS may be unable to place a lien on your assets, but most other tax proceedings can continue under a stay. Audits, notices and assessments could still be free-flowing.
- Support: Spousal and child support are usually undeterred by bankruptcy filings, and an automatic stay isn’t likely to be any different. The state-ordered monthly check you’re required to write may have to keep going out.
- Loans: If you need to repay a loan that you took out against your retirement accounts, like a pension or IRA, you could still be on the hook to cover those payments.
You can get some immediate relief in bankruptcy from an automatic stay, but make sure you know where its power lies. Get the time you need to make a plan and handle what you can under the protection of an automatic stay.