The automatic stay allows a bankruptcy filer to avoid harassment and collection actions. This provision starts as soon as the bankruptcy plan goes into effect. The automatic stay is beneficial in most cases in California where debtors are hounded by creditors and collectors.
Defining an automatic stay
Bankruptcy is a legal procedure that allows the debtor to repay debts in a revised repayment plan. After you file a petition and qualify for Chapter 7 bankruptcy, an automatic stay occurs to prevent creditors from attempting to collect payments and seize your assets. The court alerts them to discontinue making phone calls and sending letters to recover your debts. The stay is lifted after the case is dismissed.
When it fails to work
However, the automatic stay is not applicable in every situation. You cannot file for bankruptcy and receive an automatic stay to avoid paying ineligible debts, such as the costs of child support, alimony, certain tax debts and certain judgments. Filing multiple bankruptcies in one year may disqualify an automatic stay.
A creditor can request to remove the stay if the collateral is valueless or if the debtor does not have sufficient income to repay the debt. The motion may be granted if the debtor’s assets are expected to lose value soon but can be sold right away.
Every case is different
An automatic stay is a positive result of filing for bankruptcy. However, the definition of the automatic stay differs in every jurisdiction. The unique circumstances of every bankruptcy case are reviewed before a stay is applied or removed.