Your Hammer Against the Creditors

Published Friday, May 1, 2009 @ 2:45 pm

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Constant calls. Late notices. Penalties. Late fees. Compound interest. Being buried under a mound of unaffordable debts can leave you feeling pretty helpless. And that’s because, on your own, you really are helpless: your creditors will keep calling, keep sending you threatening letters, and keep you and your family in fear. And they eventually will act on their threats, by suing you, taking your property, or even garnishing your wages. You remain at their mercy until you pay up – which, of course, you can’t afford to do!

Enter: bankruptcy’s automatic stay. This is your hammer against the harassing creditors. If you file bankruptcy, your creditors are forbidden by law from continuing their collection activities against you while your case is pending. You are no longer defenseless. Once your case is filed, you can finally tell your creditors to “Back off!” – and this time, they have to listen.

If you’re at the mercy of unmanageable debts, the importance of the automatic stay in helping you get a fresh start cannot be overstated. But, it is good to understand the ultimate reach of the stay – exactly what it does and does not do.

If — like many people up against the ropes in the fight with their debts — the bulk of your financial problems stem from unsecured debts, the automatic stay is nothing sort of a godsend. When it comes to unsecured creditors – like credit card companies and medical care providers – the automatic stay shuts them down. They can’t sue you. They can’t even threaten to sue you. They just have to leave you alone, like it or not.

When it comes to secured debts, the automatic stay offers protection against repossession. If you are behind on a home, car or other secured property, the stay will immediately stop the creditor from repossessing your property. This will give you time to catch up on missed payments in a Chapter 13 payment plan.

Some of things a stay cannot do: The stay won’t stop criminal prosecutions, divorce proceedings where no property is at issue, or proceedings to revoke professional licenses. If you’re facing eviction, the stay might stop the proceedings, but not if your landlord has already gotten a judgment for possession and the time to reinstate the lease has expired under the law of your state. Talk to your bankruptcy attorney immediately if you’re in this boat, because timing is everything.

Finally, if you’ve had a bankruptcy case dismissed within the last year, special rules or limitations may apply before the stay kicks into full effect. Your bankruptcy attorney can go through these rules with you and explain how they might affect your case.

The automatic stay is a powerful tool in getting a handle on creditors. It represents the beginning of the end of most, if not all, of the unmanageable debts in your life. It is the start of a new chapter. Your bankruptcy attorney will make sure you get the most that the stay – and the entire bankruptcy process – has to offer you. So, if you haven’t already, call a bankruptcy attorney today to stop the harassment and move on with your life.

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