Bankruptcy: Stopping Recollection Activity from Creditors

Bankruptcy in Salt Lake CityFiling for bankruptcy stops most actions of your creditors or collection agencies through an automatic stay. This is issued by a court and prevents common situations such as attempts to repossess a car, foreclosure, utility disconnections, as well as wage garnishments. Note, however, that the automatic stay will only cease the proceedings temporarily.

A bankruptcy lawyer in Salt Lake City notes that the purpose of this is to give the court a time to decide on your financial matters. There is also the intention of allowing you to start anew and treating creditors equally. The court will then take control of the actions in the recollection of money. The stay goes into effect regardless of what bankruptcy chapter you file for.

Temporary Protection

In the case of utility bills, the automatic stay will prevent the disconnection for a minimum of 20 days. It will also prevent the foreclosure proceedings for a certain time, and the creditor may proceed with it after some time. With garnishments, however, the stay will allow you to take your entire salary and discharge debt in bankruptcy.

Unaffected Actions

There are few instances that the automatic stay can do nothing. The IRS can ask for a tax return, which then results in an audit. The stay can only stop the IRS from seizing your income/property or issuing a tax lien. Some lawsuits like the collection of child or spousal support will not be stopped when you file for bankruptcy. It will also do nothing for criminal proceedings or in withholding income to repay a loan.

Lifting the Stay

Most creditors usually stop the collection activity when you inform them that you’re filing for bankruptcy. Some, however, will ask the court to remove (or lift) the stay. Secured creditors often file motions to remove the automatic stay if you don’t make payments on secured debts. The court will lift stay unless you have a good reason to deny the motion or make payments.

If you’re filing for bankruptcy, it is best to get help from a bankruptcy lawyer. This is to help you know more about automatic stay and help you decide which chapter to file for.