Once you file for bankruptcy, you activate the automatic stay that protects you from creditors and collection agencies.
Although the automatic stay cannot help in all situations, here are four ways you can expect to benefit.
1. Ending foreclosure
If your lending institution is threatening foreclosure proceedings on your home, the automatic stay will stop this from happening. Keep in mind that the foreclosure process may resume once the automatic stay ends.
2. Keeping the lights on
If you are behind in paying your utility bill, the provider may turn off your gas, electric, water or phone service. The automatic stay can stop this for at least 20 days while you work out a way to remedy the situation
3. Putting a hold on an eviction
An automatic stay can also put a hold on a proposed eviction. This is a stopgap measure since your landlord may already have a court-issued judgment against you. However, it gives you time to consider your next step.
4. Eliminating wage garnishments
Until it is lifted, the automatic stay will stop any wage garnishments that are coming your way.
Understanding the limits
The automatic stay does not apply to certain circumstances. For example, it works to keep the IRS from issuing a tax lien against either your property or income. But it will not prevent the IRS from demanding tax payments or issuing a tax assessment. Also, if you owe child support payments, the automatic stay will not stop a lawsuit against you. And although the automatic stay stops wage garnishment in its usual form, it will not stop this kind of process if you need to repay a loan you took against your pension.