Bankruptcy – The Automatic Stay
Being an Albuquerque bankruptcy lawyer, the benefit that the automatic stay has for individuals who wish to file a bankruptcy to stop harassing creditors, is clear. The automatic stay helps in situations where creditors can make a person’s life a living nightmare. With phone calls trying to collect debt, threats of potential lawsuits, and seeking a judgment to have wages garnished, creditors can make a debtor’s life very difficult. Bankruptcy is often necessary as a result of these types of situations. One advantage in filing a bankruptcy is something known as “The Automatic Stay”. The automatic stay comes from Section 362 of the Bankruptcy Code (Title 11 of the United States Code) titled “automatic stay” and starts when the bankruptcy petition is filed.
The basic idea of the automatic stay is that it stops or freezes creditor collection actions; for example, a house in foreclosure cannot be pursued by creditors. Common creditor actions to which the automatic stay applies include the initiation or continuance of any court proceeding (including actions to create or enforce a lien on a debtor’s property), and attempts by creditors to repossess the debtor’s property. Secured creditors (the owner of the mortgage on a home, or lender on a vehicle loan), can, however, motion the court for relief from the automatic stay. The automatic stay is useful to stop wage garnishment or delay the sale of a home in foreclosure. The automatic stay remains in effect until the judge either lifts the stay (with a secured creditor for example), or the debtor gets a discharge. At discharge the stay basically becomes a permanent injunction on pre-petition debts that were discharged as part of the bankruptcy.
Knowing the type of debts a person has is important in determining whether or not a bankruptcy will be beneficial for an individual. Debt is classified as either secured or unsecured debt. Generally a bankruptcy will allow debtors to discharge significant amounts of their unsecured debt, whereas the lenders have protection in the event the debt is secured. The protection for the secured creditors is that they are first in line for sale proceeds at the sale of the asset to which the debt is tied. With secured debt, the debtor has the option to reaffirm the debt (by making payments) if they want to keep the asset in question; this allows debtors to keep their house through a bankruptcy. These nuanced issues really indicate why a bankruptcy attorney is recommended when deciding to file a bankruptcy.