If you are thinking about filing for chapter 7 bankruptcy, chances are that you have experienced numerous collection attempts from your creditors.  The attempts can range from a harmless collection letter to your creditors garnishing your wages.  One of the great advantages of filing for chapter 7 bankruptcy is that as soon as you file, the automatic stay stops your creditors from attempting to collect on your debt.

The purpose of the automatic stay is two fold.  First, it gives the consumer an opportunity to catch her breath by preventing collection attempts.  Second, it gives the bankruptcy trustee an opportunity to evenly distribute your assets amongst your creditors.  Essentially it stops any last second efforts by your creditors to try and get more money than they are allowed by law.  Remember that one of the overriding goals of bankruptcy is to treat all of your creditors equally.  The automatic stay encourages the equitable treatment of your creditors by allowing an impartial third party, the bankruptcy trustee, to divide your nonexempt assets equally amongst your creditors.  But the reality is that in most of the cases I see, there are no assets to distribute.  Therefore, the automatic stay’s main purpose is to stop unscrupulous lenders from trying to bully people into paying them when they have no obligation to do so.

The biggest advantage of the automatic stay is that it stops collection attempts dead in their tracks.  It even stops lawsuits your creditors brought against you.  If you are facing a wage garnishment, filing for bankruptcy stops that suit from proceeding until you receive your discharge.  At that point, the case can resume only if your debt was not discharged.  For example, if your credit card company is trying to garnish your wages, the automatic stay will stop that lawsuit.  And if your credit card debt is discharged, that suit is over.  But the automatic stay does not stop all lawsuits.  For instance, the automatic stay will not stop criminal proceedings or lawsuits concerning property that is not a part of your bankruptcy estate.

The automatic stay temporarily stops your creditors from: (1) making any collection attempts, and (2) bringing lawsuits against you to collect on your debt while your bankruptcy is pending.  In other words, the automatic stay gives you a temporary break from being constantly hounded by your creditors.  But the automatic stay does not last forever.  There are several events that lift the protection of the automatic stay. First, the automatic stay stops when a creditor successfully moves the bankruptcy court to lift the stay for a certain piece of property.  One of the most prominent examples of this is when a mortgage lender files a motion to lift the automatic stay so it can foreclose on a home.  Second, the automatic stay is lifted when a piece of your property is no longer considered a part of your bankruptcy estate.  Finally, the automatic stay is lifted when you receive your bankruptcy discharge.  At that time, your automatic stay is exchanged for the discharge.  At that point, your creditors are no longer allowed to attempt to collect on any of your debt that has been discharged.

Before you file for bankruptcy, it is important to grasp exactly what protections the automatic stay will provide you. First, although the automatic stay provides temporary relief from creditors, it probably won’t do much to help you if you are facing a foreclosure.  If you can become current on your home loan before you receive your discharge, then the automatic stay might help.  If not, then you really need to consider filing for chapter 13 bankruptcy.  Second, don’t file thinking the automatic permanently stops all lawsuits, because it does not.

Consult with a skilled bankruptcy attorney to help determine if filing for chapter 7 is the best way to address your problem.  In some cases, filing for chapter 13 is the better approach, and in yet others, it is best to do nothing at all. The automatic stay is a powerful tool, but it is not a cure all. Talk with an attorney so you can ensure that filing for chapter 7 bankruptcy is right for you

Topeka Bankruptcy Attorney