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Bankruptcy and the automatic stay

On Behalf of | Dec 22, 2021 | Chapter 7 Bankruptcy |

Memphis consumers who become overwhelmed by debt often wait a long time to file for bankruptcy. It’s common for people to take on more debt to repay existing obligations and even let some of their accounts go into collections before they seek help. The result of these actions can be a lot of letters, phone calls and collection attempts from creditors.

What is the automatic stay?

One of the most helpful parts of bankruptcy is the automatic stay that goes into effect on the date that the bankruptcy petition is filed. If your creditors are contacting you about payments, the automatic stay legally protects you from being contacted any further. Creditors that continue to ask for payment from a debtor who is in bankruptcy are breaking the law.

What debt is covered by the automatic stay?

The automatic stay will cover all of your consumer debts like credit card balances and personal loans. Debts from unpaid medical bills and secured loans are also covered. The only debts that are not covered by the automatic stay are back child support and alimony as well as court debts for criminal proceedings. Money owed to the IRS cannot be collected during the automatic stay, but your tax refund can be seized to repay it.

How long does the automatic stay last?

The automatic stay will protect you from collections attempts for the length of your bankruptcy case. Once your case is dismissed, the automatic stay is lifted. However, at that point, some of your unsecured debts may be discharged if you filed for Chapter 7.