For people overwhelmed with debt, filing for bankruptcy may be the best option. There are many benefits to filing for bankruptcy, and one of these advantages is the application of an automatic stay by the court during bankruptcy proceedings. At the Cornwell Law Firm, our experienced bankruptcy attorneys are here to help you through the process and answer your questions every step of the way. To learn more, call or contact our office today to schedule a consultation.
How Does an Automatic Stay Work?
An automatic stay is an order issued by the bankruptcy court that prevents creditors from continuing collection efforts or from possessing a debtor’s assets in order to collect on debts. The automatic stay also extends to collection agencies and government entities and remains in place until the bankruptcy proceedings are complete.
Common examples of actions that an automatic stay prohibits include the following:
- Starting court proceedings against a debtor,
- Continuing court proceedings against a debtor,
- Foreclosing on a debtor’s property,
- Creating, perfecting, or enforcing liens, and
- Repossessing property used as collateral.
If a creditor or other collector violates an automatic stay, the debtor can file a civil lawsuit against them for damages.
The Purpose of an Automatic Stay
There are a couple of reasons why the court protects debtors with an automatic stay. The first reason is that an automatic stay allows a bankruptcy trustee to accurately inventory and assess the state of a debtor’s finances during bankruptcy proceedings. The second reason is that it prevents creditors from jumping the line and collecting debts ahead of others that are supposed to collect first. Generally speaking, secured debts are paid before unsecured debts, which are organized by the trustee in the bankruptcy process. Lastly, an automatic stay ensures that creditors receive the proportional share of repayment that they are owed per the bankruptcy trustee’s evaluation.
Benefits of an Automatic Stay
There are many benefits to receiving an automatic stay after filing for bankruptcy. One of the biggest benefits is that creditors are legally banned from continuing to contact a person and harass them about paying their debt. Another significant benefit is that the debtor gets to keep their property, including their home, cars, and personal items. The same applies if the debtor is a business, which can keep its inventory, building, and other items that are required to make the business run. Finally, after the automatic stay is lifted the remaining debts are either wiped out or paid off, which means that creditors will not restart collection efforts after the bankruptcy process is over.
Talk to Our Office Now
Are you interested in learning more about filing for bankruptcy and the benefits of an automatic stay for your situation? The benefits of an automatic stay are often one of the primary drivers that convince individuals and businesses to file for bankruptcy. If so, call the office or contact us today at the Cornwell Law Firm in Duluth to speak with an experienced Georgia bankruptcy lawyer about your case and schedule a bankruptcy consultation.