How may an automatic stay help when filing for bankruptcy?

| May 18, 2021 | Bankruptcy |

An automatic stay, which generally follows a bankruptcy filing, could prevent creditors and collection agents from contacting you about your debts. Without the continuing phone calls and demand letters, you may find relief from harassment as you move forward.

If you fell behind in mortgage payments, an automatic stay may stop the foreclosure process. According to Bankrate.com, an automatic stay may also prevent a utility company from disconnecting your services. If you rent your home, your landlord may face an eviction delay while your case remains open.

When may creditors request an exemption from an automatic stay?

After filing a bankruptcy petition, the automatic stay becomes effective but a creditor may attempt to lift it by contacting the court. Creditors may request an exemption by proving fraud or showing that not collecting your debt brings harm to their business.

If you previously filed for no more than one bankruptcy within one year and a judge dismissed it without prejudice, the automatic stay may last only 30 days. You may need to show that your second petition is in good faith and not an attempt to obstruct a particular creditor from taking your assets.

How long may an automatic stay last with no previous filing?

An automatic stay generally remains in place for as long as your bankruptcy case is open. If you qualify for Chapter 7, the court may discharge some of your debts within a few months.

If you qualify for Chapter 13, the court may set up a monthly payment arrangement that lasts three to five years. Once you complete your payments, the court may discharge your remaining debts.

The type of bankruptcy you qualify for determines the length of your case. By filing a petition, an automatic stay may stop creditors from contacting you and may remain in effect until the court discharges your debts.