Automatic Stay Provision

Bankruptcy is often the last resort for individuals who are drowning in debt.  It offers a chance for people to slowly pay off their debt, or eliminate most of the debt.  For individuals filing bankruptcy, an automatic stay provision is often desired.  It protects the filer and ensures that he or she will not be harassed by creditors or lenders and that the creditors will be able to take no further action against the filer on behalf of the debt.  Below, you will find more information on what an automatic stay provision is and how it can help bankruptcy filers.

What Exactly Is an Automatic Stay Provision?

When an individual files for chapter 13 to chapter 7 bankruptcy, they or a bankruptcy attorney on their behalf files a bankruptcy petition that includes information regarding the filer’s financial affairs.  This petition will include the debt that is owed and to what creditors and more.  When this petition is filed, the court automatically grants the filer with an automatic stay provision.  This is a protective injunction which halts creditors who are trying to obtain payments using letters, calls, etc.  It also stops them from placing liens against the debtor.

While this provision is meant to protect the bankruptcy filer, there are also clauses which protect lenders if the debt is secured.  For instance, if the debt is related to real estate, the creditor has an interest such as a home or something similar.  The lender must file a petition to show that the provision doesn’t adequately protect the creditor – and in this case, the individual may have to pay monthly payments on the debt.  This might include debts regarding homes that are being purchased, vehicles that are being purchased, storefronts or other properties that are being purchased. 

The automatic stay provision also has stipulations regarding a renter/tenant relationship.  For instance, if a landlord was already in the process of eviction before the renter filed for bankruptcy (and if the landlord was granted a judgment of possession) then the provision will not stop the eviction proceedings.  Also, if the landlord was seeking eviction due to the presence of illegal drugs or endangerment of the property, the proceedings will also not be stopped.

What Creditors Will a Stay of Provision Affect?

The types of creditors that a stay of provision will affect include those that are owed money in an unsecured debt situation, including but not limited to:

• Credit Card Companies
• Hospitals or Clinics
• Collection Agencies
• Stores with Lines of Credit

The Stay of Provision keeps creditors from continuing any action against the filer, while the bankruptcy often clears these types of debts from the filer.  This can be a great help to individuals that are unable to pay their debts and are being harassed by creditors.

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