How does an automatic stay work in bankruptcy?

One of the most traumatizing things about owing money is when the debt collectors try to get their money, but you don’t have it to give to them. Bankruptcy is one option that some people opt to utilize, so they can get ahold of their finances.

Filing bankruptcy puts a stop to the collection attempts that you’re dealing with. When you file, the court issues an automatic stay. This is an order that prevents creditors from trying to contact you. This ceases phone calls, letters, in-person visits and all other efforts.

What’s the purpose of the automatic stay?

Not all creditors are handled the same way in a bankruptcy case. Instead, they are assigned to a priority class. Most consumer creditors won’t receive the full balance due on the account. Because of this, they can’t try to circumvent the court to collect. The automatic stay prevents creditors from having an unfair advantage over others involved in your case.

It’s imperative that anyone who’s filed for bankruptcy know what to do if they’re approached for payment. You can’t legally pay the debt. Instead, let them know that you filed for bankruptcy. You may have to give them your attorney’s contact information and tell them to contact the attorney.

Make sure that you let your lawyer know if a debt collector continues to try to collect on the debt even after you let them know that you filed bankruptcy. You may have legal options to handle those creditors. Learning your rights and what options you have can help you ensure you aren’t being taken advantage of when you file.