What is the Automatic Stay?

The automatic stay is basically an order from the court that prevents your creditors from making any collection efforts while your case is pending. It also has the power to stop any garnishments that are currently in force. Attempting to breach the stay is considered a serious offense to the court and can lead to an unpleasant outcome for the creditor.

What’s the Purpose of the Automatic Stay?

The stay accomplishes several things. One has to do with providing you with some relief from collection calls at home or work, stopping collection letters, and in general eliminating the need for you to interact with those creditors. While your case is active, all creditors communicate with the court or your attorney instead.

While the stay is in effect, creditors are not free to add more fees and penalties to your balances. They are effectively frozen until the court decides what to do with your petition. This has the effect of not adding to the debt that you already owe.

Is the Stay Available in Both Chapter 7 and Chapter 13?

The automatic stay is part of the bankruptcy court’s process for both Chapter 7 and Chapter 13 petitions. While each form of bankruptcy does work a little differently, the need for the court to maintain control over communication and to ensure no additional charges are applied is important.

How Long Does the Stay Last?

In most instances, they stay will remain in place until your bankruptcy is discharged. That will vary depending on the type of bankruptcy petition that you filed.

A Chapter 7 bankruptcy usually takes a few months to complete. Your stay will remain in effect until all debts are discharged and the court considers the matter closed. With a Chapter 13 bankruptcy, it could take three to five years for you to pay your debts through the court. The stay will remain in place until the court considers the terms of the bankruptcy fulfilled and discharges the case.

While the stay will apply in most bankruptcy cases, there are some limitations. If you had a previous bankruptcy petition dismissed in the last twelve months, the stay may only last for 30 days. If you’ve had two or more petitions dismissed during the last year, the court may not grant a stay at all.

What’s a Lift of the Automatic Stay?

A lift of an automatic stay is a request by a creditor to be relieved from the stay. This may happen if the creditor believes you did not provide full disclosure to the court or are not attempting to comply with the court’s requirements.

For example, the lender who holds your mortgage may claim that you are not making an effort to catch up on back payments as required by the court. In that scenario, the lender may want the stay lifted so the property can be foreclosed on.

Make the most of the automatic stay to take care of essential tasks and start planning for the future. Unhampered by collection calls and other distractions, you can focus on taking the financial education classes required by the court, catch up back mortgage or car payments, and position yourself for the day that the court approves your petition. Doing so will make it easier to look forward to when you once again have full control of your finances.