For individuals behind on their bills struggling to make ends meet, it may seem that creditors know no bounds; they call at all hours of the day, send menacing letters, freeze bank accounts and can even garnish wages. If you find yourself in this predicament, you should contact a bankruptcy attorney who can immediately cease these actions through a concept in bankruptcy law known as the automatic stay. As soon as an individual in the United States files for bankruptcy any lawsuit and collections actions against the party and their property must cease. This automatic stay may help you stay in your home by stopping foreclosure proceedings, keep the electricity on and even stop wage garnishment.
It’s important to note that the automatic stay does not apply to all financial obligations. For instance, even after you file for bankruptcy, the IRS can still audit you or demand a tax return. The agency cannot, however, place a tax lien on your property or seize your bank account. You will also still be required to pay child support or alimony during this time period and any collections efforts for this type of support will not cease during the automatic stay.
The automatic stay in no way resolves your debts, it just places any debt collection actions on hold as the bankruptcy trustee works on your case, determining how your various debts will be settled or repaid as part of your payment plan.
Secured creditors may petition the court to lift the stay, if they have good cause. For instance, say you are on the verge of having your car repossessed for back-payment and the bank learns that you are no longer carrying insurance on the car (a necessity when financing a vehicle), they may ask the court to allow them to proceed with the repossession as this may be the only way to protect the property which they still own.
If you have filed for bankruptcy multiple times within the past year, the automatic stay may be reduced in time (it lasts for just 30 days if you are filing for the second time within a year) or never go into effect at all (if you’ve filed three or more times in a year). Contact a bankruptcy attorney at Schneiders & Associates, L.L.P. who can help you better understand how filing will impact your current financial situation and help you complete all necessary forms.