Filing Bankruptcy and the Automatic Stay: A Method for Keeping the Dragons at Bay?

For a financially overwhelmed debtor, filing a chapter 13 or chapter 7 bankruptcy petition can keep creditors at bay. Once the individual files the petition an automatic stay is ordered and becomes effective immediately upon the filing of the petition. The stay prevents all of the debtor's creditors from continuing to seek repayments on their debts until the bankruptcy proceedings are concluded. To many people in bankruptcy situations, the automatic stay provides a saving grace and permits their lives to return to some semblance of normalcy until the conclusion of the proceedings when their financial situation has been improved by the bankruptcy. In addition, once a person files for either chapter 13 or chapter 7 bankruptcy, any and all lawsuits with regards to the debtor's debts are stalled and creditors cannot seek wage garnishments from the debtor. If the debtor files for bankruptcy after creditors were awarded wage garnishment, these garnishments immediately stop and any funds that were taken from the debtor he or she has filed the bankruptcy petition must be refunded to the bankruptcy estate. Further, once a bankruptcy petition has been filed, creditors cannot communicate or attempt to contact a debtor by phone, letters, or most other means of communication. This usually comes as a huge relief to debtors who typically find that they are inundated with constant phone calls and letter correspondence from creditors seeking repayments of debts. The following are just some of the other creditor actions that must stop when a person files for bankruptcy: applications for liens against property, mortgage foreclosures, termination of utility services such as electricity and phone, tax foreclosures, repossession of property, and eviction proceedings - just to name a few. Bankruptcy laws are very complicated, therefore it is strongly advised that debtors seek out the advice of an experienced bankruptcy attorney to assist him or her with bankruptcy matters. For more information regarding Chapter 13 bankruptcy, Chapter 7 bankruptcy, foreclosure or other consumer debt issues in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and not intended to replace the advice of an attorney.