While filing for bankruptcy can help eliminate debt and put a person on the path to a much brighter financial future, it's important to understand that these benefits are not realized until the end of the process.
This isn't to say, however, that there are no shorter-term benefits to filing. Indeed, one needn't look any further than what is known as the automatic stay, which can provide an immediate and much-needed lifeline to those in financial distress.
In general, an automatic stay is a legal mechanism that takes effect as soon as an individual files for personal bankruptcy protection and which essentially bars certain collection actions from being taken against them.
To illustrate, these are just a few of the ways in which an automatic stay can help during the bankruptcy process:
- It stops actions by creditors and collections agencies
- It stops the foreclosure process
- It stops eviction or at least slows the process down
- It stops wage garnishment
- It stops the disconnection of utilities
As helpful as an automatic stay can be, it's important to know that it does have certain limitations. To that end, these are a few of the ways in which an automatic stay can't help during the bankruptcy process:
- It can't stop actions to establish, enforce or modify child support
- It can't stop certain tax proceedings by the Internal Revenue Service, including audits or the issuance of tax assessments
- It can't stop enforcement of criminal sentences that are unrelated to debt, such that a person ordered to perform community service and pay restitution in a criminal proceeding would only see the restitution portion of the sentence halted if they filed for bankruptcy
If you would like to learn more about the automatic stay or how personal bankruptcy -- Chapter 7, Chapter 13 -- works, please consider speaking with an experienced legal professional.