The Automatic Stay of Bankruptcy

Many people file an emergency bankruptcy petition to stop creditors, mortgage lenders and others to from whatever activity they are involved. The automatic stay of bankruptcy just like the lien stripping of the second mortgage on a home are an important tool to avoid and tackle foreclosure. Especially Sacramento Foreclosures, Contra Costa Foreclosures and Fairfield Foreclosures have increased bankruptcy filings in the last months.

What is the Automatic Stay?

The automatic stay stops most collection and other actions against you in their tracks. For exceptions click here. It is a court order that is effective immediately upon filing of your bankruptcy petition and stays in effect unless a creditor successfully obtains relief from the automatic stay. The idea of the automatic stay according to Congress is to give the debtor a “breathing spell” and relief from the creditors.

How it stops Collectors?

When you file your bankruptcy petition the automatic stay automatically stops collectors from harassing you and trying to collect the debt. Any creditors and collections agencies are prohibited by law from collecting once the petition is filed. Threatening letters from attorneys, harassing phone calls from collectors, and lawsuits to collect money for bills such as credit card or health care bills will have to stop immediately. Once you filed for bankruptcy the creditors cannot:

  1. Garnish your wages
  2. Seize your bank account
  3. File a lawsuit
  4. Put liens on your property
  5. Report your debt to a credit reporting agency