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Bankruptcy Overview: The Automatic Stay

Posted by attorney Keith Carr

WHAT IS THE AUTOMATIC STAY IN BANKRUPTCY? When a person files for bankruptcy (Chapter 7, 13, or 11), all his or her creditors are immediately prevented from attempting to collect the debt. This is called the "automatic stay."

This means that filing for a bankruptcy immediately relieves a person from creditor harassment such as annoying phone calls, lawsuits, repossessions, foreclosures, and any other method for collection of a debt. Has your bank started foreclosure (by filing Notice of Default) against your home because you are delinquent on your mortgage payments? You can save your home by filing for Chapter 13 Bankruptcy. The filing of the Chapter 13 Bankruptcy automatically stops the foreclosure process.

Likewise, a creditor may initiate the wage garnishment procedure against you in order to take 25% of your wages. The filing of a Chapter 7 or 13 Bankruptcy automatically stops the creditor from proceeding with the wage garnishment. In the same manner, your finance company can be stopped right away from repossessing your car. These are all examples of the "automatic stay" of any Bankruptcy.

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