The Automatic Stay: An Effective Timeout and STOP Sign

July 19, 2012 (Press-News.org) The Automatic Stay: An Effective Timeout and STOP Sign

In basketball, sometimes a timeout is crucial. If the momentum of the game is going the wrong way, a pause to regroup can be very important.

The same is true of debt relief. If you are considering bankruptcy, the automatic stay that comes with a bankruptcy filing can play an important strategic role. It can, for example, help stop foreclosure and creditor harassment.

This article will discuss the basic purpose of the automatic stay for debtors filing for bankruptcy in Texas and across the country.

Effect of the Automatic Stay

You can think of the automatic stay as a collection timeout to help you get back in the financial game. Another way to picture it, for people being bothered by creditors, is as a huge STOP sign. This is the case not only for unsecured creditors, but for secured creditors as well.

The automatic stay applies no matter which type of bankruptcy you choose. It applies to consumer bankruptcies under Chapter 7 or Chapter 13. The same is true for business bankruptcies under Chapter 11.

Filing a bankruptcy petition tells creditors to stop trying to collect from you for pre-petition debts. To be sure, it doesn't cause such attempts to be postponed forever. But it requires that future attempts to collect debts must go through the bankruptcy process.

In legal terms, this means the automatic stay is essentially a temporary injunction. It momentarily stops creditors in their tracks. No hearing is required. Indeed, no additional approval is required by the bankruptcy court, as long as the bankruptcy petition was appropriately filed with sufficient supporting documentation.

In practice, then, the automatic stay means that creditors cannot contact you seeking payment for debts incurred before the bankruptcy filing. Creditors are also prohibited from suing you, intervening in a pending lawsuit against you, or trying to enforce a judgment against you.

Again, think back to the image of the STOP sign. The automatic stay prevents creditors from continuing with debt collection procedures that were already in motion. This includes garnishment of wages, repossession of vehicles, and foreclosure of houses.

After the Stay Ends

As with any temporary injunction, the automatic stay in bankruptcy is just that: temporary. The law intends it to be a breathing spell to enable you to get your bankruptcy plan together. Use your timeout wisely with advice from an experienced bankruptcy attorney who can coach you through your challenges.

Article provided by Davis Law Firm
Visit us at www.myaustinbankruptcyattorney.com