What is the automatic stay in bankruptcy?

Knowing that you owe creditors money is a disheartening situation. You probably don’t need to be reminded of it on a daily basis with phone calls and letters. Unfortunately, collection agencies and bill collectors don’t mind that type of contact with the people who owe them money.

The stress likely increases when you know that you can’t pay them and can’t see a way that you would be able to in the near future.  When this occurs, you might need to seek relief by filing for bankruptcy. This comes with a court ordered automatic stay that most people who file for bankruptcy appreciate.

An automatic stay is an order that prevents the collection agency and bill collectors from trying any form of collections. They can’t mail you letters, call you, come to your home or use any other method to try to get money from you. This can reduce your stress as you work toward a fresh financial start.

The purpose of the automatic stay

The automatic puts your creditors on an even level during the bankruptcy. You can’t show any of them favoritism in repaying them. This is because the court has a specific method for determining the priority of debts in bankruptcy. There’s a chance that creditors won’t get their entire balance due from a person who files for bankruptcy. The priority system ensures that all creditors get their fair share of what the bankruptcy trustee has to give from your case.

There are limited situations in which the automatic stay won’t apply. Your bankruptcy attorney can help you to learn about these and explain various aspects of the bankruptcy process to you. Be sure to be honest with them and discuss your concerns and circumstances so they can provide you with the best advice for your situation.