Filing for bankruptcy allows a debtor to take advantage of protection known as the automatic stay. The stay acts as an injunction that stops creditors’ attempts to collect debts or enforce liens during the bankruptcy case. Once you file for bankruptcy, your assets will be transferred to the bankruptcy estate, and an automatic stay will protect you from your creditors.
If you are considering filing for bankruptcy in Arizona, call us today at Phoenix Fresh Start Bankruptcy Attorneys, PLLC today. Our credible Phoenix bankruptcy attorneys will explain how a court-ordered automatic stay can help you in your bankruptcy case.
The automatic stay is a federal court order issued “automatically” by the United States Bankruptcy Court. From the moment you file your bankruptcy petition, this stay stops your creditor, collection agency, or government entity from taking any further collection activity against you. It strictly prohibits the continuation of foreclosure, repossession, garnishment, lawsuit, collection phone calls, sending of any bill or collection letter, or “payment reminder” through the mail.
An automatic stay is a powerful tool that can help you solve your financial troubles. If you’ve fallen behind on mortgage or credit card payments, if the utility companies have been threatening to turn off your service, or if you’re about to be evicted from your home, then the automatic stay can save you. If creditors or debt collectors continue to harass a debtor after a stay is in place, they may violate the Fair Debt Collection Practices Act.
As soon as you file your bankruptcy petition, the stay will immediately take place, alerting creditors and collectors that debt collection actions against you must stop. A knowledgeable Phoenix bankruptcy lawyer can explain the various things that an automatic stay can do for you and your financial situation.
Stop Utility Disconnection
An automatic stay stops your utilities from being disconnected. If you’re behind on your utility bills, some companies might threaten to disconnect your electricity, gas, water, or telephone services. In this case, the automatic stay will prevent the disconnection for at least 20 days.
Although a utility bill rarely justifies a bankruptcy filing, it might make sense to file if you have other debts that you can discharge. Some utility companies will likely require you to pay a deposit to guarantee future payment.
Stop a Government Agency From Collecting the Overpayment of Public Benefits
If you were overpaid for any benefits (Medicare or unemployment benefits), an automatic stay prevents creditors from garnishing the overpayment. However, it does not stop the agency that gives the benefits from stopping payment to you.
If you receive public benefits before you file your bankruptcy petition, the stay will stop the agency from collecting any benefits that were overpaid to you. This will last until the stay is lifted. Typically, the agency would collect the overpayment from you either by billing or deducting from your future benefit checks. However, if you become ineligible for benefits, the automatic stay doesn’t prevent the agency from denying or terminating benefits for that reason.
One of the benefits of the automatic stay is to delay or stop an eviction proceeding. If you’re being evicted from your home, the stay can temporarily help you stall the eviction. However, if your landlord already has a judgment of possession against you when you file for bankruptcy, the stay won’t affect these eviction proceedings.
In most cases, the automatic stay can give you a few days or weeks, but the landlord will probably ask the court to lift the stay and allow the eviction. The laws governing the automatic stay might be subject to change over time. Therefore, consulting a qualified Phoenix, AZ bankruptcy attorney is essential to ensure that your automatic stay and bankruptcy process would go smoothly.
Stop Foreclosure Proceedings
If you’re facing a home foreclosure, the automatic stay in bankruptcy will stop these proceedings. However, even though the foreclosure process is temporarily stopped, the bank will find ways to continue the foreclosure proceedings as soon as the stay is lifted.
The automatic stay gives you more time to try to deal with a pending foreclosure. The options for dealing with the proceedings depend on whether you file for bankruptcy under Chapter 7 or 13.
In Chapter 13 bankruptcy, the automatic stay can give you more time to catch up on any mortgage arrears and keep your home. You can repay debts or delinquent payments on a home mortgage through a repayment plan lasting three to five years.
In contrast, Chapter 7 can’t help you catch up on payments and keep your home. If you want to save your home, this bankruptcy chapter will not work for you. The relief provided by the automatic stay will only be temporary.
Stop Multiple Wage Garnishments
A wage garnishment is a tool whereby a certain amount of your monthly income is taken from your paycheck to pay your creditor. Wage garnishment intends to pay off the entire debt. An automatic stay can protect you from having your wages garnished. If the debt that prompted your wage garnishment is wiped out in bankruptcy, filing for bankruptcy could permanently stop the garnishment.
Be aware that commonly garnished debts (child support and alimony) won’t get discharged. What will happen to overdue support payments and back taxes will depend on the bankruptcy chapter that you file.
At Phoenix Fresh Start Bankruptcy Attorneys, PLLC, our seasoned bankruptcy lawyers in Phoenix will evaluate your financial situation and recommend how to stop wage garnishment through an automatic stay.