These days, it is common to find people declaring bankruptcy - the reasons for this are many. One could be finding it difficult to repay various loans, both secured and unsecured; the inability to discharge financial obligations such as utility bills, mortgage payments, child support and handle debts or just cases of bad financial judgment, such as shopping indiscriminately with your credit card when you already have a high debt burden.
There is no shortage of reasons why people get into a debt spiral in the first place, but a majority finds that they are unable to extricate themselves from it without a windfall, and for a large percentage of such people, bankruptcy seems to be the only way out. The principal reason for this is the bankruptcy automatic stay.
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What does bankruptcy automatic stay mean?
An automatic stay is part of the protection provided to the debtor by the law when a bankruptcy is filed in a court with jurisdiction. It means that you no longer have to repay debts incurred prior to filing until the case is settled. Once you file for bankruptcy, the stay kicks in automatically. Your creditors can no longer approach you directly - either via telephone or by mail. They need to petition the court for relief if they want to collect their money.
Most of the times, the creditors will file for relief in an attempt to claim at least part of your property to offset their losses. Sometimes, petitions for relief from automatic stay may be filed for other legal claims such as overdue alimony or child support payments. In most cases, the stay is a way for debtors to get some breathing room from near constant harassment by creditors out to recover their money.
Bankruptcy automatic stay is applicable for both chapter 13 and chapter 7 bankruptcy, and is applicable as soon as the filing process is over. The period over which the stay is applicable is different however, and will extend over the entire repayment period for chapter 13 bankruptcy if the debtor does not miss any payments. Once the payments are missed, the creditor may file for relief from bankruptcy automatic stay so that collection attempts can be resumed.
If you are making payment under chapter 13 repayment plan and have a sudden financial reversal, informing the creditors and renegotiating through your attorney is probably the best thing that you could do.
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