One of the most persistent problems faced by individuals who are having financial troubles is the daily rain of collection notices from various creditors. These letters are often accompanied by calls from demanding and intrusive calls from debt collectors. Filing a bankruptcy petition can stop this constant harassment by invoking one of the most power remedies in the bankruptcy code: the automatic stay.
What is the automatic stay?
A stay is an order issued by a court that halts parties served with the stay order from taking the actions described in the order. When an individual files a petition for bankruptcy relief in either Chapter 7 or Chapter 13, the clerk of the bankruptcy court immediately prepares and serves an order on all creditors identified in the bankruptcy petition directing them to promptly cease any collection actions against the debtor. The stay applies to the commencement or continuation of any action to collect a debt or assert a claim against the debtor, to obtain possession of any of the debtor’s property, or create or perfect a lien against any property of the debtor.
Can the stay be lifted?
The stay remains in effect until the bankruptcy case is closed or the case dismissed. Any creditor who is governed by the stay can file an order with the bankruptcy court seeking to have the stay removed (or “lifted”). The request to lift the stay will be heard by the court and a written order issued thereafter. If the court does not issue an order, the stay expires automatically 50 days after a request for relief is made by a party.
Despite the seemingly miraculous effect of the automatic stay, no one should file a bankruptcy petition without consulting an experienced bankruptcy attorney for an evaluation of the individual’s financial situation.