Once you file for bankruptcy, a court order called the Automatic Stay can immediately stop the lawsuits filed against you, as well as most actions against your property by a creditor, collection agency, or government presence.
The Automatic Stay is established during both Chapter 13 and Chapter 7 bankruptcies, in which within a Chapter 13 bankruptcy, the Automatic Stay may stay in effect during a period of generally 3 to 5 years, and for a period of a few months within a Chapter 7 bankruptcy.
The Automatic Stay may be able to prevent a variety of actions, including:
- utility disconnections, in which if you are behind on your utility payments and the company is threatening to cut your water, gas, electric, or telephone services, the automatic stay can prevent this for at least 20 days;
- foreclosure of your home;
- collection of overpayments of public benefits;
- phone calls and letters from your creditors;
- wage garnishments;
- automobile repossession
- bank freezes;
- eviction from your home; however new bankruptcy laws make it easier for landlords to advance with evictions if the landlord has obtained a judgment of eviction prior to the bankruptcy filing. You can, however, cure your rent arrears through a Chapter 13 or simply buy more time to move.
There are, however, some actions which the automatic stay cannot prevent. These include:
- certain tax proceedings, which prevents the IRS from issuing a tax lien or seizing your property or income; However, the IRS is still able to audit you, demand a tax return, issue a tax deficiency notice or a tax assessment, or demand payment of a tax assessment;
- domestic support actions or criminal proceedings.
If you need to be protected from creditors, collection agencies, or a government presence, then bankruptcy may be the right solution for you. You can be immediately protected from this harassment with an automatic stay, as once you file bankruptcy and your debts are eliminated, it is illegal for your creditors to pursue payment of your debts.