While many people see bankruptcy as a careless disregard for financial responsibility, in reality it is more an act of sheer desperation. This is not a decision to be taken lightly, and you are likely in dire straits to consider bankruptcy as a solution. Being threatened with the loss of basic human necessities such as housing, home heating and transportation can be a major motivational factor for filing bankruptcy.
Bankruptcy is the hoped-for relief when you are about to lose almost everything, and an efficient and effective method of holding off the creditors who are hounding you night and day. The automatic stay becomes a virtual stop sign from the moment you file your bankruptcy paperwork with the court. Read on for what an automatic stay can and cannot do.
What an automatic stay can do:
- It will stop wage garnishments completely. With the exception of child-support payments, you will now be able to take home your entire paycheck. Some of the debts that initially caused the garnishments may not be dischargeable in your bankruptcy, but you can temporarily halt the garnishment actions.
- It will stop foreclosure proceedings against your home. You may still lose your home, but for the time-being you have time to make other living arrangements without fear of being tossed into the street.
- It will keep your gas, water, telephone and electricity from being disconnected for at least 20 days.
- If you file a chapter 13 bankruptcy, you will be given help to develop a plan to repay all or part of your debts.
What an automatic stay cannot do:
- It won't help you if you owe child support or alimony, and it won't stop any wage garnishment associated with that debt.
- If you owe the IRS, you will still need to make any tax payments that are owed or continue paying your installment plan as agreed. It will stop a lien from being placed on your property, however.
- If you owe money to the courts for a criminal act, you must still pay the fees and fines.
While an automatic stay cannot completely keep all financial obligations on hold, it will help you to maintain a place to live and give you some breathing room. You need time to make a plan for a fresh start, and your bankruptcy attorney can work with you to make sure that you can do so without being harassed by creditors. If you have decided that bankruptcy is the best option for you, consult with your attorney for more details and to begin your new financial life.