When you’re struggling with debt, creditors can seem relentless. Phone calls, letters and even legal actions can make your life stressful. However, filing for Chapter 13 bankruptcy can provide relief through something called the “automatic stay.” Let’s explore what this means and how it can protect you.
How the automatic stay works
As soon as you file your Chapter 13 petition, the automatic stay:
- Stops most collection efforts
- Halts foreclosure proceedings
- Prevents utility shutoffs
- Stops wage garnishments
- Pauses most lawsuits against you
The court notifies your creditors, and they must comply with the stay or face penalties. However, it’s crucial to understand that the stay doesn’t eliminate your debts. It simply pauses most collection activities while you work through the bankruptcy process.
The automatic stay typically remains in effect for the duration of your case. This means you can receive protection from creditor harassment and collection efforts while you complete your repayment plan, which usually takes three to five years.
Exceptions to the automatic stay
While the automatic stay offers significant protection, it doesn’t cover everything. Some actions that can still proceed include:
- Criminal proceedings
- Certain tax audits, assessments and demands for tax returns
- Child support and alimony actions
- Some eviction proceedings, especially if the landlord obtained a judgment before you filed for bankruptcy
It’s also important to note that creditors can request relief from the automatic stay in some cases. For instance, a secured creditor might seek relief if they believe their collateral is at risk of significant depreciation. Similarly, a landlord might request relief to proceed with an eviction if they obtained a judgment before the bankruptcy filing.
Make informed financial decisions
Bankruptcy law is complex, and the rules surrounding the automatic stay have many nuances and exceptions. To understand how the automatic stay applies to your specific situation, seek professional legal counsel.
