When you file for bankruptcy, you trigger an “automatic stay,” your protection against creditors and others who wish to collect money from you.
However, the automatic stay is not all-powerful. Here is a look at what it can and cannot do for you
Stops wage garnishment
An automatic stay will stop all wage garnishment proceedings. If you have multiple garnishments, you can begin taking home your entire salary once the automatic stay is in place.
Perhaps you worry about the threat of foreclosure. Even if your financial institution has already begun the process, the automatic stay will put an immediate stop to it. Keep in mind that once the stay is lifted, the foreclosure process may resume. Consider filing Chapter 13 to get around this activity.
Delays disconnection of utilities
Is the utility company preparing to turn off your service because you are behind in your payments? The automatic stay can prevent this from happening for at least 20 days, allowing you time to pay your bill.
Issues the automatic stay cannot address
There is much relief the automatic stay can offer, but it cannot help you in every situation. For example, it will not dissuade the Internal Revenue Service from auditing you or demanding that you file a tax return. It will not help you avoid a lawsuit if you are behind on child support payments. Also, if you have a pension from which you took a loan, the automatic stay will not prevent your paycheck from garnishment in order to repay that loan. Every bankruptcy is unique. Your attorney can help answer your questions about the bankruptcy process and the pros and cons of the automatic stay.