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Bankruptcy Law: Understanding the "Automatic Stay"

Last updated 2 years ago

For many people, the thought of filing for bankruptcy is menacing. However, when faced with complicated financial struggles, bankruptcy can result in positive changes. One of the most beneficial features of bankruptcy is the automatic stay. Here is an overview of this powerful form of protection.

What Is Automatic Stay?

As its name suggests, an automatic stay is an automatic order that prevents creditors from collecting debts from an individual who has filed for bankruptcy. The automatic stay occurs at the moment you file for bankruptcy. Because the automatic stay will stop any lawsuit filed against you, be it from a creditor, government entity, or collection agency, you may want to consider filing for bankruptcy knowing that you’ll be protected by this powerful injunction.

What Can Automatic Stay Protect Me From?

Automatic stay can protect you from a wide range of emergency situations, from utility disconnections to being found in contempt for failure to pay child support. People who are concerned about their risk for a home mortgage foreclosure may find relief from an automatic stay, which will temporarily cease the foreclosure process.

What Can’t Automatic Stay Protect Me From?

Outside of the legal bounds of the automatic stay are criminal proceedings, loans from a pension, and support actions. It is also important to understand that filing for bankruptcy will not prevent the IRS from issuing a tax lien.

How Can Automatic Stay Be Lifted?

The automatic stay is not always a fixed and definitive rule. Creditors can take action to lift the automatic stay by seeking permission directly from the bankruptcy court. However, it should be noted that this is not common, but will typically occur if you are not making payments on secured debts, or if it is unlikely that you will make future payments.

Consult with the bankruptcy attorneys at Dixon & Johnston, P.C. if you are considering filing for bankruptcy. We are dedicated to representing clients throughout Southern Illinois who need help resolving their financial concerns. Call our Belleville office at (618) 233-1103 to schedule your initial consultation with one of our experienced bankruptcy attorneys. 


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