Along with the ability to eliminate certain types of debts, one of the key benefits of bankruptcy is the automatic stay. This is an order that is put in place by a bankruptcy court immediately after a debtor files for bankruptcy, and it will force creditors to cease all collection actions during the case. This means that creditors cannot call, email, send letters, or otherwise communicate with a debtor. They cannot proceed with a legal judgment against a debtor, garnish their wages, freeze or seize their bank accounts, repossess a vehicle or other property, or take any other actions in an attempt to collect a debt. Any foreclosure proceedings that have been initiated must be put to a halt.
The automatic stay can provide a debtor with protections and give them some "breathing room" as they address their debts during the bankruptcy process. However, there are some situations where the automatic stay can be lifted. By understanding when a creditor may request an exception to the automatic stay, a debtor can make sure they are prepared to address these issues as they proceed with bankruptcy.
The Purpose of the Automatic Stay
The main purpose of the automatic stay is to provide a debtor with relief from creditor harassment and give them time to reorganize their finances during bankruptcy. It is designed to stop creditors from taking aggressive or unfair collection actions, and it also ensures that any assets turned over by the debtor will be distributed fairly without giving preference to any creditors.
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