Automatic stay in bankruptcy is the provision in the bankruptcy code that puts into effect an immediate cessation of collection efforts by creditors on you once you file for bankruptcy. When you bankruptcy filing is confirmed, the court will inform your creditors accordingly and enforce the automatic stay. Sometimes, a creditor may try to collect payment outside the automatic stay but to do so he would need the judge to grant permission for these collection activities. In general, the automatic stay will be in force until the court reverses it or you exit bankruptcy.
Automatic stay gives you more time to handle finances. The provision is especially useful for those who are at risk of eviction, foreclosure, utility disconnection and or wage garnishment as it prevents you from being evicted or your property foreclosed, your utilities cut or wages garnished.
Certain payment obligations on your part are exempted from automatic stay, such as alimony payments and child support. When it comes to tax debt many people mistakenly classify it together with alimony and child support thinking that collection efforts by the IRS cannot be stopped by automatic stay.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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