WHAT IS AUTOMATIC STAY, AND HOW DOES IT WORK?
One of the benefits of filing for bankruptcy is the automatic stay. The automatic stay prevents creditors from collecting any debts that the debtor owes. When debtors file a bankruptcy petition with the court the “automatic stay” allows the debtor to carry less of a burden by excluding creditors from attempting to collect any debt while the bankruptcy is being processed in the court system.
The primary function of the automatic stay is to allow the debtor some financial relief while their case is being examined by the trustee. The automatic stay helps the debtor’s and their assets by protecting them from creditors who want to pursue or continue legal action that could result in wage or bank account garnishment, foreclosures, and repossessions.
The automatic stay has limitations with respect to creditors. Secured debts are secured with a lien which allows the creditor to cancel the property when a debtor fails to abide by the obligations of the promissory note. However, within the first thirty days the secured property is safe by way of the automatic stay. The debtor, however, must file a “statement of intent” to inform the creditor of whether they want to continue to abide by the promissory note, or surrender the property to the creditor and have their debt discharged. One thing to keep in mind is, if the debtor stops making payments or is behind on their payments, the creditor can attempt to lift the stay.
If the motion is granted, then the stay is lifted for the secured creditor. The automatic stay is still in effect for any unsecured non-priority creditors even if the stay is lifted for certain secured creditors. The stay will remain in effect until a motion to lift the stay is granted or until the bankruptcy is discharged and/or the case is dismissed.
If you are experiencing financial hardship and need some relief, contact a bankruptcy attorney for some assistance!