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How the automatic stay can protect bankruptcy filers

On Behalf of | Sep 16, 2021 | Chapter 7 Bankruptcy

The automatic stay is an important bankruptcy tool that provides protection for bankruptcy filers throughout the bankruptcy process. Struggling consumers considering filing for bankruptcy protection should understand how Chapter 7 bankruptcy works and the protections of the automatic stay.

Protections of the automatic stay during bankruptcy

There are several protections the automatic stay can provide during bankruptcy including:

  • Wage garnishment – if the filing party is having their wages garnished, the automatic stay can prevent their wages from being garnished during the bankruptcy process.
  • Stop utility disconnection – if the filing party is facing the threat of having their utilities disconnected, the automatic stay may be able to stop that process and prevent telephone, gas, electric or water services from being disconnected for at least 20 days.
  • Stop foreclosure proceedings and evictions – the automatic stay can stop the foreclosure process, however, it may not be able to provide long term relief from foreclosure. Other bankruptcy options may be able to help with that. It may also help with evictions. For both foreclosure and evictions, after a certain point in the process, the automatic stay may be less useful.
  • Stop government agencies from recovering overpayment of public benefits – the automatic stay can stop a government entity from seeking public benefits that were overpaid to the filing party until the automatic stay is lifted.

The automatic stay only applies during the bankruptcy process while it is underway and applies regardless of the type of personal bankruptcy protection struggling consumer has filed for. It applies to creditors, collection agencies, government entities and any other person seeking money from the filing party. This can be a relief for many struggling consumers who have creditors at their heels it may feel like every minute of every day.