bankruptcy and divorce
Bankruptcy Automatic Stay Definition
A Bankruptcy automatic stay definition is a temporary evaluation that is put into place automatically once a petition for bankruptcy has been filed by an individual or a company. Once an automatic stay is in place, the order prohibits creditors from taking certain actions against the debtor such as proceeding with lawsuits, attempting to gather debt, initiating foreclosure measures or garnishing wages. While it might seem an automatic stay is unfair to creditors, it actually can result in a more reasonable distribution of bankruptcy assets because an automatic stay prevents a hostile creditor from being able to declare to a large percentage of the person or entity’s assets before others have a chance.
The automatic stay goes into effect when you file bankruptcy. The stay prevents creditors and collectors from trying to accumulate debts from you. They cannot call you, send letters, or charge you as long as the automatic stay is in effect.
In bankruptcy, an order against any ongoing collection process by any creditor. That is, all creditors must stop current attempts to collect debts during the bankruptcy proceedings. Chapter 13 bankruptcy also protects co-debtors who may not have filed bankruptcy. The automatic stay prevents creditors from filing lawsuits, making collection calls, or repossessing or foreclosing on property until the debts are discharged (or not) or the bankruptcy judge lifts the stay. American bankruptcy law limits the automatic stay for second-time filers to 30 days, and does not grant automatic stays for third and subsequent filings.
A provision allowed under U.S. Bankruptcy law that prevents the commencement or continuation of most judicial, administrative, or other proceedings against the debtor or the debtor’s estate after bankruptcy is filed. The purpose behind an automatic stay is to give breathing room to a debtor filing a Chapter 11 or Chapter 13 bankruptcy, and to give a Chapter 7 trustee the time and protection to administer the assets of the estate. The automatic stay also stops Chapter 7 debtors from being pressured by collection agencies. However, anyone who does not want to abide by the automatic stay can file a motion with the bankruptcy court and ask for an exception.
Creditors can, in some instances, file a Motion to Lift Stay requesting the bankruptcy court lift the automatic stay in your case and allow them to collection from you. It is common for mortgage lenders to request the automatic stay to be lifted so they can complete foreclosure proceedings. The lender’s request might be denied if you have nonexempt equity in your home that can be liquidated and used to pay some of your unsecured creditors.
When somebody files a bankruptcy petition, all efforts to gather debt have to end unless they fit within one of the carefully worded exceptions in the bankruptcy statute. Here is how the automatic stay works and how the exceptions work – in the context of bankruptcy and divorce.
Most people have established the automatic stay to be one of the most tempting and liberating aspects of filing bankruptcy, as it can basically remove the hassle of having to deal with the late-night phone calls, threatening letters and other harassing efforts of debt collectors.
For more support on how to file bankruptcy, visit www.onlinebkassist.com.
About the Author
Steve Young is the author of The #1 Secret On How To File Bankruptcy. To get your free CD on How to File Bankruptcy Without an Attorney, go to http://www.onlinebkassist.com
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