Have you ever been flying down the road, only to slow to a halt at the sight of a bright red stop sign? In a lot of ways, you can think of an “automatic stay” in bankruptcy as a helpful “stop sign,” telling creditors to hit the brakes at the start of the bankruptcy process.

For many people, this “stay” is considered to be one of the major advantages of filing for bankruptcy. As governed by Section 362 of the United States Bankruptcy Code, this measure is a way to temporarily push pause on certain actions by creditors, allowing you to gain some breathing room, sort out your financial situation, and move forward on surer footing. In particular, an automatic stay can offer relief to those facing lawsuits over debt, or who are dealing with major collection actions by creditors and debt collection agents.

The Effects of an Automatic Stay

When you file for Chapter 7 or Chapter 13 bankruptcy, an automatic stay order is typically sent to creditors, alerting them of the bankruptcy and, by extension, automatically prohibiting them from taking certain actions against you. The effects of the automatic stay will apply differently, in different cases.

Broadly speaking, consumers going into bankruptcy often use the automatic stay to take protection from certain common, urgent actions and events, including:

  • Keeping Utilities Operating
    An automatic stay is a way to keep your utilities functioning without being disconnected, for a set period of time. If you’re behind on your water, gas, or power bills, the automatic stay can help you keep yours systems running, buying you time to focus on other important matters.
  • Slowing Foreclosure Proceedings
    An automatic stay order can delay or even stop foreclosure proceedings, in many circumstances. From there, going through the bankruptcy process can allow you to devise a strategy and take action to protect your property. For instance, in Chapter 13 bankruptcy, you will likely be able to create a repayment plan in order to restructure your home payments. In Chapter 7 bankruptcy, the stay may grant you the opportunity to come up with a plan to protect certain assets, while liquidating others.
  • Temporarily Avoiding Eviction
    In some cases, an automatic stay can help buy you time to remain in your home if you’re facing the potential threat of eviction.
  • Pausing Various Debt Collection Efforts
    Broadly speaking, the automatic stay put into effect by a bankruptcy filing can provide relief from different types of debt collection efforts. In certain situations, this stay can stop wage garnishment. The stay also stops creditors from creating, perfecting, or enforcing new liens against your property, or attempting to repossess collateral property. In many cases, filers are also granted legal recourse against creditors, and may be able to sue creditors who continue to take legal action or enforce collection efforts once the stay is in effect.

The Limits of the Automatic Stay

It’s important to recognize that an automatic stay will have some limits, which are important to know. It’s also key to realize that the effects, uses, and exact circumstances around the automatic stay will vary from case to case. For instance, the length of the automatic stay will vary, depending on the specific circumstances around your bankruptcy, and the type of bankruptcy filing you’re pursuing (e.g., Chapter 7 versus Chapter 13).

It’s also important to note that creditors can take action to lift the stay, generally by filing a motion requesting permission to continue collection efforts. It will be up to the courts to grant or deny this motion, depending on the case presented by the creditor.

There are also certain actions and events that a stay will not necessarily stop, including many types of tax deficiencies and assessments; payments relating to child support or alimony; loans from pensions; and criminal proceedings. A stay will also be quite limited in the event of multiple/serial filings (e.g., having more than one bankruptcy case open at the same time).

An Experienced Local Attorney Can Provide More Insights

As with so many things pertaining to bankruptcy, the definition of an automatic stay is quite straightforward – but putting it into practice successfully can be more complicated. In many cases, it will help to work with an experienced bankruptcy attorney, in order to determine if you qualify for bankruptcy; ensure that you are filing for bankruptcy correctly in order to protect your assets to the fullest possible extent; and to address any complications or issues as they arise (such as a creditor attempting to lift a stay, for example).

In any case, having a legal professional on your side can help make the complex and time-intensive process of bankruptcy easier – and, broadly speaking, more successful. In fact, reports show that consumers who attempt Chapter 7 or Chapter 13 bankruptcy with the assistance of an attorney are far more likely to have successful filings than consumers who attempt to file pro se, or without the help of a legal professional.

About the Gunderson Law Firm

If you’re feeling overwhelmed or burdened by debt, or if you’re facing serious consequences – such as the threat of foreclosure or a debt collection lawsuit – it’s important to take action to protect yourself and your assets. If you’re feeling intimidated and unsure of where to go next, don’t hesitate to get in touch with the attorneys and staff of the Gunderson Law Firm. Our team is well-versed in the many aspects that go into debt and bankruptcy law in Illinois, and we’d be happy to discuss your options and explain important concepts in more depth.

If you have any questions or are looking for guidance, the Gunderson Law Firm can help can get you actual, straightforward answers for your unique situation – no need to search for all the variables and hope you don’t miss any key detail.

At the Gunderson Law Firm, our experienced bankruptcy team will take all steps possible to protect you and your assets immediately, and throughout the bankruptcy process. Down the line, we can also counsel you on realistic ways to avoid such serious debt issues in the future. Whether you are a business owner, a wage earner, retired, or otherwise, we can address your specific situation with strategic plans to help put severe indebtedness behind you so you can enjoy life again. Don’t hesitate to drop us a line with any questions, or to set up your free initial consultation.