When someone files a voluntary bankruptcy petition, the automatic y stay goes into effect. This generally means that creditors can’t take action to recover payment from the debtor. The automatic stay is covered under the Bankruptcy Code, and it has two primary purposes for bankruptcy petitioners in California and the rest of the country.
Debtors have a break
It usually takes a lot for someone to decide that they would like to file for bankruptcy. When this occurs, they are under a great deal of stress. For this reason, they would benefit from having a break from calls and mail notices from creditors about what they still owe. An automatic stay prevents these companies and agencies from continuing their collection efforts, which in some instances includes some form of harassment.
Keep creditors from racing to the courthouse
Creditors likely will want to hurry to file their court claims, which can lead to a race. An automatic stay ensures fairness in the distribution of funds.
No extra steps are necessary
You don’t need to take any steps beyond filing your bankruptcy petition to put an automatic stay in place. It doesn’t require a hearing and notices don’t have to be sent to creditors for them to have to honor the automatic stay and not continue collection efforts or other actions against you.
How long does an automatic stay last
An automatic stay only protects property that falls under the bankruptcy estate, which means only property that belongs to the debtor and their estate. This also doesn’t apply to claims filed after the bankruptcy case starts. The stay against property continues until the individual’s property is no longer part of their bankruptcy estate. An automatic stay on other acts will continue until the dismissal or completion of the bankruptcy case. It also will continue until the debtor gets a denial or grant of a discharge on the debt.
An automatic stay is a wonderful thing. It allows debtors to have some relief from the stress that they already have going through bankruptcy proceedings. Understanding what this involves and preparing yourself for any possible consequences once the automatic stay ends is in your best interest.