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What is an automatic stay in a bankruptcy?

If you are one of the many people in American who are overwhelmed with credit card bills, medical expenses, mortgages and other forms of debt, you may be familiar with receiving continuous calls from creditors and collection agencies. Collection agency representatives may call at all hours of the day and night and may even threaten to take legal action if you don’t make payments on your debt. In some cases, creditors have threatened to throw the debtor in jail or even take their children if they do not pay up. An automatic stay keeps these creditors and collection agencies from contacting you during the bankruptcy process.

Once you file your Chapter 7 or Chapter 13 paperwork, a letter is sent to collection agencies telling them to stop all actions against you. Agencies are no longer able to pursue or initiate lawsuits, make demanding phone calls, garnish your wages or make other threats in an attempt to gain payments. It is extremely important that you make a comprehensive list of all the creditors you own when submitting your bankruptcy paperwork, since these are the agencies that will be given the automatic stay. While some automatic stays may be temporary, most last the duration of the bankruptcy until your debt is fully discharged.

Under the Fair Debt Collection Practices Act, creditors and collection agencies are not allowed to call at all hours of the day, use profane language, threaten violence, increase a debt or pretend to be attorneys.

This information is intended to educate and should not be taken for legal advice.

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