For most people, owing money is a very stressful thing. You might stay up at night trying to make the budget work so you can pay off the debts. There are some instances in which it just isn’t possible. When that happens, you may consider bankruptcy.
One of the positive things that some filers appreciate is the automatic stay. This is a provision of the laws that prohibits creditors from trying to collect on the accounts that are included in the bankruptcy case. This means that they have to stop sending letters, calling you or engaging in any other kind of collection attempts.
What’s the purpose of the automatic stay?
The automatic stay does help relieve the stress of debtors quite a bit — but it’s actually designed to level the playing field among creditors when a consumer files for bankruptcy. Creditors aren’t likely going to get paid for the entire balance of the debtor’s account. Instead, debts are assigned a priority category that determines how much they will receive — if anything — during the bankruptcy proceedings.
Without the automatic stay in place, creditors could circumvent the priority schedule for payment. This would put aggressive creditors at an unfair advantage over others because they could essentially bully the debtor into paying them just to stop the collection harassment.
Is bankruptcy right for you?
The automatic stay shouldn’t be the only reason you file for bankruptcy. Before you file discuss your situation with your attorney so you can determine whether bankruptcy is right for your situation and what type of bankruptcy (Chapter 7 or Chapter 11) is best. You can also learn about the things you’re required to do in order to successfully complete the bankruptcy process.