If you are not working, have overwhelming medical bills or other debt and miss multiple mortgage payments, your lender may begin foreclosure proceedings if you cannot make alternate payment arrangements. Filing bankruptcy may help you not only clear most of your debt, but it can also provide a defense against foreclosure.
According to the U.S. Courts, an automatic stay stops most creditors from continuing collection activities. It is one of the primary defenses against foreclosure.
What is an automatic stay?
The automatic stay is a federal court injunction that protects you and your property. The court automatically enters it upon the filing of your case. The stay gives you a reprieve from aggressive debt collection activities and puts creditors on equal footing when it comes to their claims. Actions stayed by the injunction include home foreclosure, as well as the following:
- Utility disconnection for at least 20 days
- Collection attempts on debts incurred before your bankruptcy filing
- Wage garnishments
- Most evictions
- Vehicle repossession
- Collection of benefit overpayments
This injunction does not remove or discharge debts. It merely prohibits efforts from collecting against them while you go through Chapter 13 or Chapter 7 bankruptcy.
What does a stay not prevent?
Although an automatic stay is a powerful tool, it does not cover every possible financial or legal issue. Exceptions a stay does not cover include tax audits and related payment demands, and lawsuits initiated after your bankruptcy filing. It also does not cover family law issues such as actions involving establishing or continuing custody, visitation or child support, divorce proceedings and associated spousal support.