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How the automatic stay might be used in bankruptcy

On Behalf of | May 28, 2021 | Bankruptcy |

One of the most immediate benefits of filing for bankruptcy in New Mexico is the automatic stay. Once your petition is filed with the bankruptcy court, a stay or injunction will be issued to your creditors to stop all collection activities while your case is pending. Once you receive a discharge of your qualifying unsecured debts at the close of your bankruptcy case, those creditors will no longer be able to try to collect on the discharged debts.

Ending collection activities

When the court issues the automatic stay, a copy will be sent to each creditor you have listed in your bankruptcy schedules. Once a creditor receives this document, it will have to cease all further collection activities. This means that creditors, collection agencies, government agencies, and individuals cannot call about your debts, continue lawsuits, send letters, or engage in other similar actions. The automatic stay will also end garnishments of your wages, stop your utilities from being disconnected, stop foreclosure proceedings, and halt an eviction until the stay is lifted. However, once the stay is lifted, debts that have not been discharged will still remain enforceable. For example, an automatic stay in a Chapter 7 bankruptcy will temporarily stop a foreclosure, but it can resume once the stay is lifted.

What happens if a creditor violates the automatic stay?

If a creditor violates the automatic stay in your bankruptcy case and continues trying to collect on its debt after receiving notice, you can file a lawsuit against the creditor. The creditor might then be forced to pay penalties and damages to you.

The automatic stay provides multiple benefits to people who are struggling with unmanageable levels of debt and choose to file for bankruptcy. While it is a great tool to provide some immediate relief, the automatic stay will not protect against everything. People who would like to learn more about their options may want to speak with an experienced bankruptcy attorney.