Monday, September 9, 2013

What is the Automatic Stay?

The Automatic stay is one of the primary reasons that people file for bankruptcy. The automatic stay is a legal protection that is given to a debtor when he files bankruptcy. No court order is needed to create the stay, hence the term “automatic.” The instant a petition is filed, federal law makes it illegal for creditors to attempt to collect the debts of a debtor. If a creditor knowingly takes action against the debtor then the creditor will be liable to the debtor for any damages, attorney fees, and costs incurred against the debtor, plus possible punitive damages if the violation is egregious.

Therefore, the automatic stay stops all foreclosures, repossessions, law suits, levies, harassing calls, letters, etc. Furthermore, if a car has been repossessed filing bankruptcy within 10 days can actually allow a debtor to get the car back.

Now some restrictions may apply depending on the debtor's individual circumstances, but the automatic stay is a great benefit to filing bankruptcy.

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