What is an automatic stay?
From the moment you file for bankruptcy protection, you get an automatic stay, which halts all legal actions from your creditors. If you are at risk of being foreclosed on, the automatic stay will temporarily stop the foreclosure process and relocate the foreclosure proceedings from the county court to the federal bankruptcy court.
An automatic stay can prevent the following:
- Wage garnishments
- Utility disconnections – for up to 20 days
Automatic stays cannot prevent:
- Paternity suit actions
- Tax proceedings
- Criminal proceedings
- Multiple bankruptcy filings – or acting in bad faith
Once a bankruptcy is filed, most creditors will request the automatic stay be lifted so they can proceed with the debt collection. So if a debtor files for bankruptcy before a foreclosure sale date, but there is no equity in the home and the mortgage is in default, the bank will ask for permission to proceed with the foreclosure. And that permission is likely to be granted.
The bottom line is that an automatic stay will buy some time, but not that much time. Creditors will continue to pursue their collection efforts. If your house is in a foreclosure situation and you do not have the ability to maintain payments, you will eventually lose the home.
If you have any further questions about avoiding foreclosure, please contact us.