When you think about bankruptcy, you may think of it in negative terms of what it could do to you, your credit, your assets, etc.

However, while it is often desirable to file for bankruptcy only after all other options have been exhausted, it is not entirely negative. Bankruptcy is a debt relief mechanism that provides you an opportunity to wipe the financial slate clean and start fresh. Instead of worrying about what bankruptcy could do to you, you should think more about what bankruptcy can do for you.

An automatic stay goes into effect the moment you file for bankruptcy and puts a temporary halt to the following collection activities.

Repossession/foreclosure

When you default on an auto loan or home mortgage, the lender may try to repossess the property. An automatic stay puts a temporary halt to repossession and/or foreclosure efforts. However, the process may resume following closure of your bankruptcy case.

Lawsuits

A creditor may attempt to sue you to recover the money you owe. However, when an automatic stay is in effect, a creditor cannot bring a new lawsuit against you. Furthermore, any lawsuits already in progress can no longer continue.

Wage garnishment

Some creditors may have the authority to garnish your wages, i.e., take some of your money out of your paycheck to satisfy a debt. However, wage garnishment cannot continue while an automatic stay is in place.

Phone calls from creditors

Creditors often resort to annoying, repetitive phone calls attempting to collect on a debt that you owe. Despite regulations in place indicating when and how often creditors can call you, sometimes their collection efforts cross the line into harassment. However, by law, an automatic stay puts a stop to all calls from creditors. You can report any violations to the appropriate authorities.

An automatic stay is not a permanent solution to your debt-related problems. However, it does buy you some time to formulate a strategy to put into play once the automatic stay comes to an end.