Don’t take for granted the extraordinariness of bankruptcy’s automatic stay. That’s the federal law that stops creditors from pursuing you, your money, and your other possessions the moment your bankruptcy case is filed.
In my last two blogs, I told you about the relatively rare situations in which the automatic stay does not apply—situations in which certain special creditors, or sometimes even all creditors, can continue collecting their debts. But let me emphasize again–the vast majority of the time, as soon as your bankruptcy case is filed, all creditor efforts against you and your property come to an immediate stop.
The automatic stay is so powerful because it is 1) fast and 2) very broad in what it covers.
Very Fast
Very few legal procedures work as quickly and efficiently as the automatic stay. To get anything done in just about any court usually takes weeks, months or even years. A complaint or motion of some sort needs to be filed, the other side usually has the opportunity to respond, then often there is a hearing of some sort, and finally a judge makes a decision.
But not with the automatic stay. It operates as a one-sided and immediate court order, made effective by the very act of filing the bankruptcy case. A judge isn’t even involved. The creditors have no immediate say about it. There IS a procedure for creditors to object and ask the judge for “relief from the automatic stay,” in other words, for permission to continue or start pursuing you or your money or property, but that’s after the fact. The automatic stay gives you an immediate breathing spell, whether your creditors like it or not.
Broad Coverage
This breathing spell protects you in just about every possible way from your creditors. It stops all phone calls and letters—“any act to collect, assess, or recover” a debt. The automatic stay stops all court and administrative proceedings against you from starting or continuing. Doesn’t matter if your bankruptcy is filed two minutes before the start of a civil lawsuit trial or the foreclosure of your house, the trial or foreclosure does not happen. If a judgment was entered against you in the past and the creditor is about to garnish your wages or checking account, these garnishments are stopped. If you’ve fallen a couple months behind on your vehicle loan payment and the repo man is looking for your car in the employee parking lot, the automatic stay sends him away empty-handed. If the IRS is about to record a lien against your home and vehicle to collect an income tax debt, the automatic stay stops the tax lien. Or if you already have a recorded tax lien and the IRS is about to grab your vehicle to pay the debt, your bankruptcy filing stops this enforcement of the tax lien.
This IS powerful medicine.
As with other strong medicine, it should be administered with the right guidance, and with help for dealing with any potential side effects. Stopping your creditors with a bankruptcy would essentially be the end of the story for many of them. But for other creditors—those with rights against your home or vehicles, or with special kinds of debts such as taxes and student loans—the breathing space gives us the opportunity to address each of these special creditors.
Contact me to get the immediate protection you need, along with the long-term financial solution for dealing with all of your creditors.