How Bankruptcy Empowers
If you are struggling with debt, chances are you are feeling powerless. Collection agents are skilled at making you feel stressed and hopeless through embarrassing phone calls at work and home; threatening letters; and sometimes legal action. The collection companies want you to feel that your only choice to stop the harassment is to “pay up.”
Fortunately, there is another option. The federal bankruptcy law can stop creditor harassment and put you back in control over your finances. The first way the Bankruptcy Code helps is by imposing an “automatic stay” against collection action against you. The automatic stay is an injunction issued by the United States Bankruptcy Court immediately upon filing your bankruptcy case. No hearing is necessary. This stay applies to creditors whether or not they have actual knowledge of your bankruptcy filing.
The purpose of the automatic stay is to give the “debtor a breathing spell from his creditors, stopping all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.” See Notes of Committee on the Judiciary, Senate Report No. 95-989. The breathing spell provides time for the debtor, the bankruptcy trustee, and the bankruptcy court to get a handle on the debtor’s financial problem and work out an appropriate solution.
The automatic stay prohibits a creditor with a claim that arose before commencement of the bankruptcy case from taking many actions, including:
• contacting the debtor to request payment (stops collection calls)
• initiating or continuing a lawsuit against the debtor (stops lawsuits)
• enforcing a judgment against the debtor (stops wage garnishments)
• repossessing personal property or foreclosing on real estate (stops repossessions and foreclosure)
The automatic stay is a temporary injunction which will last until either the bankruptcy judge lifts the stay at the request of a creditor; the debtor receives a discharge; or an item of property is no longer property of the estate. Lifting the stay requires notice and a hearing. There are a few exceptions to the automatic stay, for instance: the automatic stay does not prevent criminal prosecutions. Likewise the automatic stay does not stop lawsuits to establish or modify alimony, maintenance, or support.
The automatic stay stops creditor collection action immediately, and puts you back in the driver’s seat. The automatic stay provides you time to work out a plan to either discharge or repay your debts, and can also give you leverage when negotiating with your creditors. By working with an experienced bankruptcy attorney, the automatic stay is a powerful tool to restructure your finances and provide you with peace of mind.