Financial struggles are increasingly common in Indiana and throughout the nation. With job loss, medical bills and other problems, people can find themselves buried in debt with concerns about the future. Bankruptcy is an option for those facing these trying circumstances. One positive in a bankruptcy filing is the automatic stay.
What is the automatic stay in bankruptcy and how does it help?
A key aspect of bankruptcy is the automatic stay. After a person has filed for bankruptcy under Chapter 7 or Chapter 13, the automatic stay prevents most collection efforts. For example, if a business closed because of recent events and its owner is simultaneously getting divorced, the bills can be overwhelming. Creditors may be calling, there could be fear that real estate, business assets and personal items will be lost and the future could be muddled. The automatic stay under Chapter 7 or Chapter 13 puts an immediate stop to creditor calls, stops all collection actions and serves as a shield as the bankruptcy moves forward.
With the automatic stay, homes cannot be foreclosed upon, eviction proceedings may stop, utilities will not be turned off for at least 20 days, and wages will not be garnished. This will remain in effect during the case. Because Chapter 7 is a liquidation bankruptcy, it might take as little as a few months. Chapter 13 is a repayment plan that takes three or five years. Those who had a previous bankruptcy dismissed within the prior year can have an automatic stay for 30 days.
Addressing debt through bankruptcy can be effective
Once the automatic stay is lifted, debt collectors can resume trying to recover payment. It is also within creditors’ rights to ask that the automatic stay be lifted if they can show that it is costing them money and harming their business. Still, each case is viewed individually. For those facing overwhelming financial challenges, it is important to be aware of how bankruptcy can help.