The Benefits of the Automatic Stay in Bankruptcy Proceedings

 Posted on January 12, 2023 in Automatic Stay

If you are struggling to repay your debts on time, you have likely spent time wishing that there was a “pause button” that you could hit so that you would be granted the time you need to find solutions to your financial challenges. If so, you should know about the protections afforded by a legal resource commonly referred to as the automatic stay.

While the automatic stay does not halt time, it does halt your creditors’ ability to demand payment and engage in other collection activities while your Chapter 7 or Chapter 13 bankruptcy case remains active. This means that, from the moment that you file bankruptcy paperwork with the court until the moment that your case is favorably closed or dismissed, your creditors will be legally required to stop breathing down your neck.

The Purposes of the Automatic Stay

There are two primary reasons why the courts protect the immediate interests of bankruptcy filers via the automatic stay. First, bankruptcy courts need time to review bankruptcy petitions. If creditors keep imposing fees, pursuing legal action, and otherwise altering a consumer’s debt situation before the court has been given the opportunity to review their case, the entire situation becomes a moving target. By halting creditors in their tracks, courts can evaluate a debtor’s entire financial picture before it evolves.

Second, allowing all collection activity to halt allows filers to take stock of their situation once it has stopped “moving.” Filers can then take advantage of this “pause button” effect to sort out their finances and seek solutions to their troubles. For example, many filers negotiate loan modifications to secured debts that cannot be discharged while the automatic stay remains in effect. That way, they will benefit from more manageable repayment terms once the stay has been lifted.

Rare Exceptions

Note that there are some limited exceptions to the protective nature of the automatic stay. Therefore, it is always a good idea to ask your attorney if any of them may apply to your case, specifically. That way, you can be prepared to deal with any creditors whose claims may be actively pursued while your bankruptcy case remains open.  

Contact a Skilled San Antonio Bankruptcy Lawyer to Learn More

If you could benefit from the protections afforded by the automatic stay, schedule a risk-free case evaluation with a knowledgeable San Antonio bankruptcy lawyer at the Law Offices of Chance M. McGhee today. We are proud to offer free legal consultations to anyone who is struggling with debt and wants to better understand their rights and options. Help is just a click or call away. You can either submit a contact form on our website or you can call us at 210-342-3400. We look forward to speaking with you. 

Source: 

https://uscode.house.gov/view.xhtml?req=granuleid:USC-1999-title11-section362&num=0&edition=1999