If you fall behind on your medical expense payments, credit card debt, car loans or mortgage, you know first-hand how obtrusive creditor phone calls can be. Creditors and collection agencies may call at odd hours of the day and night, reminding you of your late payments, and causing anxiety in the process.
While you may feel like creditor harassment is taking over, there are steps you can take to minimize the calls or eliminate them altogether. One of the benefits of filing for bankruptcy is the automatic stay.
What is an automatic stay?
Once you file Chapter 7 or Chapter 13 bankruptcy, the court will initiate an automatic stay, keeping creditors from contacting you regarding late payments or overdue expenses, according to Bankrate. It also protects your property from repossession by banks or institutions. For instance, if the bank was threatening foreclosure on your property due to nonpayment, it could not proceed with repossession while you undergo the bankruptcy process.
What types of debt does an automatic stay cover?
It is essential to include a comprehensive list of creditors on your bankruptcy paperwork, as the court issues an automatic stay to those specific entities. A stay stops the following from occurring:
- Wage garnishments
- Filing or pursuing lawsuits
- Phone calls
- Collection on overpaid government benefits
- Foreclosure and repossession
- Utilities from shutting off
It is possible for creditors to get the stay lifted if they can prove that it causes them to lose money or damages their business. Furthermore, some debts, such as student loans and unpaid taxes, will remain even after the bankruptcy is finalized.
While bankruptcy is not for everyone, it offers some a clean financial slate when it comes to discharging an overwhelming debt. It is helpful to understand the process and the advantages that come with it.