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What is the automatic stay in bankruptcy?

On Behalf of | Sep 28, 2022 | What Bankruptcy Can Do |

Residents of Tennessee who are crippled by massive debt might want to consider filing for bankruptcy. After filing, an automatic stay goes in place. This is an important component of the process.

The automatic stay explained

When a person files for Chapter 7 or Chapter 13 bankruptcy, the automatic stay will be ordered by the court. This instantly stops creditors and collection agencies from trying to seize the individual’s property to satisfy the debt they owe. It also puts a stop to civil lawsuits to collect on debts. The automatic stay can help prevent certain actions from occurring temporarily or even permanently.

Things the automatic stay can prevent

Certain debts can be instantly stopped with the automatic stay. Things that are considered emergencies can at least be temporarily stopped. If you’re at risk of being evicted, the automatic stay can give a person leeway so that they can continue living in their home. However, this is temporary and landlords are permitted to evict a person if they owe significant back rent.

Utility disconnections are stopped with the automatic stay for at least 20 days. If a home is at risk of foreclosure, Chapter 13 bankruptcy is ideal as it can help a person keep their home while paying back their creditors for three to five years. The automatic stay is temporary but remains longer.

Individuals who have a judgment against them for wage garnishments can find that the automatic stay could immediately stop those garnishments. Of course, certain debts cannot be discharged through bankruptcy such as alimony and child support. However, some other unsecured debts like credit card balances can be wiped out.

An automatic stay remains in place for as long as your bankruptcy case lasts. This might be a few months for Chapter 7 and three to five years for Chapter 13.