Filing Bankruptcy And The Creation Of The Automatic Stay

The automatic stay in the most powerful tool when filing bankruptcy. The automatic stay provides a shield of protection against most collection efforts. In the video below, we discuss just how powerful the stay is when filing a bankruptcy case.

David Siegel: Let’s talk about what’s created the minute a bankruptcy case under Chapter 7 is filed and that’s the automatic stay. What is the automatic stay and how does it benefit the debtor?

Jesse Barrientes: Oh, yes. The automatic stay. It’s a really great tool because when you have all these creditors and I just want to tell our viewers at home. You can’t ignore the problem. If you ignore the problem, it’s not going to go away. It’s just going to get worse. What you need to do is as soon as you are in dire financial straits, is to talk to an experienced bankruptcy attorney to figure out what your options are. You might not have to file right then but at least you will know and you are doing something rather than sticking your head in the sand.

But upon the filing, when you file your Chapter 7 with the Bankruptcy Court, the automatic stay essentially prohibits any creditor from taking any action to collect what you owe them. So once the Chapter 7 is filed and generally the Bankruptcy Court sends out generated notices to the creditors and then they are prohibited from even calling you. Any steps whatsoever, in fact, it’s even much worse than that because I will tell you, if for example you are in a situation where you started collection proceedings or let’s just say that I’ve issued whatever it was, as soon as I get that stay as an attorney, I have an affirmative obligation to take steps to stop it. I cannot simply just do nothing. So the automatic stay, it is a powerful shield to prevent the abuses that occur with some of the creditors who will abuse the automatic stay.

David Siegel: Right, I do want to point out that the automatic stay is not absolute with regard to child support, maintenance, domestic support obligations, criminal fines or criminal prosecution does not stop based on a bankruptcy filing. So it is very powerful –

Jesse Barrientes: Taxes, yep.

David Siegel: But there are some limits on what the stay will do. But for the most part, you’re right; creditors see that stay, it’s a big stop sign and they have to stop.

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