People mired in debt may be afraid of losing their home or car, but the stress of constant phone calls from dogged collectors can be too much for one to bear. Fortunately, most debt can be eliminated through bankruptcy, and one of the principal benefits is the automatic stay. This post will describe what the stay is, how it protects debtors who have filed bankruptcy, and how it can be used to promote a fresh financial start.

The automatic stay is an immediate injunction to all collection actions on any debt named under the bankruptcy petition. The stay goes into effect immediately once the petition is filed, and it prevents creditors contacting debtors by telephone or sending demand letters.  

The stay also stops all litigation against the debtor since any claims against the debtor are now claims against the bankruptcy estate, and must be administered through the bankruptcy trustee. So pending lawsuits against a debtor are temporarily suspended and creditors may not initiate new lawsuits to collect on debts listed in the petition. Collection proceedings against tax debts are also stayed.

Creditors are notified by the court that a debtor has filed for bankruptcy protection and are given specific instructions on how to pursue a claim against the estate. As such, creditors can be held strictly liable for contacting debtors in the midst of a Chapter 7 case or completing a Chapter 13 plan.

If you have questions about further protections under the automatic stay, an experienced bankruptcy attorney can advise you.