The Power of the Bankruptcy Automatic Stay


One of the most useful aspects of filing for bankruptcy is taking advantage of the automatic stay provision. If you've ever been hounded by creditors looking for payment, you know how incredibly stressful this can be. The automatic stay forbids creditors from contacting you without getting the court's permission.

I consider this a powerful benefit when declaring a personal bankruptcy because it buys you some time and allows you to settle your case with the federal bankruptcy court. It prevents creditors and bill collectors from harassing you and adding more stress to your life.

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One thing you might need to keep in mind is whether you should notify your creditors of the automatic stay. For example, if you think you're about to lose your car to repossession and you have just filed a petition with the court, you should probably notify the lien holder (the car company or bank) immediately so you can avoid repossession. Otherwise, you might be able to get your car back, but this would create more problems for you and your lawyer. You would have added stress by making the process more complicated, and you may end up paying more as well.

At the same time, you may not want to mention that you're filing Chapter 7 until after you've actually done so. If you tell the car company before the automatic stay kicks in, it may try to repossess while it still has the legal authority to do so.

You can notify your employer to stop any wage garnishment, and you can also prevent foreclosure from taking place. By the way, if you're worried about your employer discriminating against you, this is prohibited by federal law (though we admit that he can still happen of course).


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