How Does Filing Bankruptcy Protect You from Creditors?When a person or business seeks bankruptcy protection, some may wonder how a filing offers protection.  When bankruptcy is filed a protection order known as the automatic stay becomes effective immediately.  The action is a welcomed relief effort that gives debtors a chance to review their situation and seek the best solution without pressuring collection actions from the creditor.

The Bankruptcy Automatic Stay Offers Legal Protection From Creditors

 In some cases a creditor can be punished if they violate rules of the stay while it’s in effect.  The stay can also help stop or halt eviction, foreclosure and other legal action including pending lawsuits against the debtor.  The stay can help stop wage garnishment and temporarily halt collection efforts from the Internal Revenue Service (IRS) for back taxes.  Some have even filed for protection to prevent utility shut off or disconnection.

Certain Situations May Not Be Eligible for Protection

While the automatic stay is a powerful tool to have in bankruptcy, in certain situations, the creditor may ask the court to overturn the protection. Certain situations may not be eligible for protection under the automatic stay such as child or spousal support or certain proceedings in relation to owed taxes.  It is also possible for a debtor to lose protection from the automatic stay if they fail to meet deadlines during bankruptcy proceedings or fail to inform secured creditors of intentions.

Contact a Bankruptcy Attorney

A creditor who makes an effort to collect from the debtor while the stay is in effect could be punished for their actions. As the bankruptcy code states, creditors are to cease collection actions upon being notified of a bankruptcy filing. Collection attempts should be reported to your bankruptcy attorney.  To determine if bankruptcy can help your situation, discuss options with an experienced bankruptcy expert. If you would like, you can contact us today for a free consultation to see if bankruptcy is right for you.