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Automatic Stay: A Stop Sign for Creditors

July 15th, 2007 by Shenron

Creditors can abuse their powers over their debtors, using the knowledge that they can always run after them. Abuse can come in many forms â€“ some may continuously annoy a debtor, some would resort to verbal harassment, and others would go so far as inflicting physical pain. If this happens, they should be accountable for their actions because although the debtors are required to pay them, any form of abuse is always unlawful. Filing for bankruptcy may be one way of getting protection from harassing creditors.

When you file for bankruptcy, automatic stay is immediately provided. This order gives the debtor protection from his creditors. Automatic stay provides the debtor temporary respite from his financial difficulties. What does the automatic stay prohibit? For one, creditors are barred from filing any lawsuit. Any legal action originating from their party is automatically obstructed. Furthermore, if you are in danger of getting your electricity, water and telephone service disconnected because you are behind on your payment, the automatic stay will prevent the disconnection for at least 20 more days.

If your property is being foreclosed, the automatic stay will temporarily discontinue the proceedings. However, since the order is only temporary, the creditor may be able to continue with the foreclosure sooner or later. In this case, Chapter 13 bankruptcy is a better solution than Chapter 7 bankruptcy if you want to keep your house. In case youâ€™re just renting a house, automatic stay inhibits immediate eviction. However, the new bankruptcy law makes it easier for landlords to continue with the eviction. If your landlord has been granted judgment for possession â€“ an order entitling the landlord to be in possession of the property â€“ the automatic stay cannot prevent the eviction process from proceeding. If the landlord also alleges that you have been using substances (drugs, alcohol) and are endangering the property, even the automatic stay wonâ€™t be much of a help.

In some cases, automatic stay may be able to buy you a few days or weeks before you finally get evicted. In addition, when you are receiving public benefits and have been overpaid, automatic stay will prevent the collection of the overpayment. In ordinary cases, the agency is entitled to collect the overpayment from future checks.

Remember however that automatic stay is temporary. When the case has been dismissed or closed, automatic stay is automatically terminated. The creditors may also obtain relief from the stay that terminates, annuls, or modifies the stay, or in certain conditions, the stay may be continued depending on particular arrangements, such as provisional payment by the debtor to the secured creditor.

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