Although the debt hole may seem like a bottomless pit, there’s a way to find relief from financial troubles — and creditors. A concept called ‘automatic stay’ goes into effect as soon as you file for bankruptcy, preventing lawsuits filed against you and collection efforts from involved agencies.
Because filing is major decision, it pays to consult your local bankruptcy attorneys first to understand the consequences of taking this particular legal move.
What Automatic Stay Covers
Automatic stay can help with your financial situation in many ways, including the prevention of utility disconnections. People who can’t keep up with utility expenses will likely receive a notice from the company informing them about cutting off services; automatic stay, however, stops this from happening — at least postpones it for at least 20 days.
Automatic stay can also hold off foreclosure and eviction. Remember that this is just temporary; creditors may proceed with these legal actions in time. File for Chapter 13 bankruptcy, instead of Chapter 7 if you are facing foreclosure, as legal practitioners say this is usually the more effective solution.
For those who are facing eviction, know that if the property manager already issued a notice when you file, the automatic stay won’t take effect. They may still proceed with eviction. This applies also when the landlord suspects you have done damage to the property.
What Automatic Stay Does Not Cover
Automatic stay, however, has limits. For instance, it won’t cover tax proceedings, which means IRS can still review finances, release a tax deficiency notice or tax assessment or ask you for payments. It may, however, prevent the IRS from taking away your property or income.
You won’t be exempted from support obligations as well. Even if you file for bankruptcy, you still have to maintain child support or alimony. Another aspect automatic stay doesn’t cover is loans from pension. Even with automatic stay, you may not be able to use income to repay a loan from some kinds of pension, for example, IRAs.
To know more about automatic stay and bankruptcy and how these can help in your financial situation, it’s best to consult legal practitioners. With their guidance, you will be able to have an informed decision about your money problems, in accordance with the law.