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Why Should I File Bankruptcy? Reason "A" Automatic Stay

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  • Why Should I File Bankruptcy? Reason "A" Automatic Stay

Why Should I file bankruptcy? Reason A is that when you file bankruptcy, the Automatic Stay goes into effect. It is one of the most powerful aspects of any bankruptcy filing. But what is the Automatic Stay? What does it mean? And why should you care?

You can think of the bankruptcy “stay” like you would the word stop. When you file bankruptcy, the places and companies that you owe money are prohibited from taking certain actions against you. They are required to stop actions or attempts to collect a debt. Creditors are generally not allowed to call you anymore, send bills, repossess your assets, garnish your wages or bank account, file or continue lawsuits against you or proceed with foreclosure on your house. As you can see, this applies to collection actions against you personally and against your assets and property and even against co-debtors who jointly owe on your debt.

There are certain debts where this stay does not apply. These debts includes actions related to establish or enforce child support or custody, certain criminal proceedings, perfecting a lien against your property, cashing of certain checks, getting new student loans, payment on 401k loans. There are many others, so make sure you consult with your bankruptcy attorney.

They stay is automatic. This is just like it sounds. When you file for bankruptcy protection, the bankruptcy stay automatically goes into effect. It is immediate. It applies even if the creditor has no knowledge of the bankruptcy. To put it into perspective, if your vehicle finance company repossess your vehicle after you file for bankruptcy protection, they will have to return the vehicle, even if at the time they took the vehicle they didn’t know about the bankruptcy. The bankruptcy protection is automatic and absolute. If they didn’t know about the bankruptcy then they likely won’t be sanctioned by the Judge for violating the automatic stay. However, if upon learning of the bankruptcy they continue to call you, sending bills or refuse to return your vehicle, then the creditor may be intentionally violating the stay and may be sanctioned or fined by the Court. Make sure you discuss this situation with your attorney first. Why should you care about the automatic stay? You should care because it is very powerful and is designed to give you immediate relief. It requires most of your creditors to leave you alone the moment you file for bankruptcy protection. It allows you the breathing space to be able to reorganize your finances to focus on what is important to you and your family as opposed to focusing on keeping quiet the creditors that constantly hound you about paying them. It allows YOU to be in control of your assets and not to worry about a creditor taking things from you.

The stay requires that all of your creditors deal with you on a level playing field under the bankruptcy rules. No creditor will be able to take advantage of you anymore. Any creditor wishing to continue its actions against MUST seek and get court permission to do so first. And any creditor who ignores the rules does so at its own peril and may be fined or even sanctioned by the Judge for violating your automatic stay. The protection starts the moment you filed for bankruptcy. It is one of the very useful tools that you get to help you achieve the fresh start that you deserve.

Feel free to email our firm with any questions about the automatic stay bankruptcy protection.

Bankruptcy Attorneys around the nation are taking part in this Bankruptcy Alphabet. See what other excellent attorneys are saying about the letter “A” in their blog posts.

Visit me on the web at www.busby-lee.com

Eric Southward is the managing attorney for the law firm Busby P.C. located at

2909 Hillcroft Suite 350

Houston, Texas 77057

(713) 974-1151

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