Once you realize that you’re drowning in debt and that there’s very little chance you’ll be able to recover without some sort of help, the option of filing for bankruptcy may come to mind. This is a responsible decision that can enable you to reclaim your financial stability.
When you file for bankruptcy, the court issues an automatic stay. This is beneficial because it stops collection attempts. You won’t have to worry about demand letters, phone calls or any other communication from most creditors as a result of this process.
Why does the court issue the automatic stay?
The primary reason for the automatic stay is to put all the creditors on a level field. Bankruptcy laws dictate a specific order for paying creditors in a bankruptcy and it’s highly unlikely that any creditor will be paid the full balance they’re due. The automatic stay prevents them from trying to circumvent that order for creditor payments.
How long does the automatic stay remain in effect?
The automatic stay will typically remain in effect until the bankruptcy is discharged, closed or dismissed. In most cases, you won’t have to deal with any collection attempts for most kinds of debts. With that said, there are some very limited exceptions to this rule.
The automatic stay is only one factor to consider when you’re determining whether to file for bankruptcy. You also need to think about other concerns, such as your responsibilities and the benefits of having a fresh financial start. Seeking legal guidance can help you to make informed decisions about all of your options.