The automatic stay granted during bankruptcy is one of the most valuable benefits of filing. Individuals facing creditor lawsuits, wage garnishment, vehicle repossession or foreclosure may file to protect themselves from losing major assets for future income.
Most people are eligible for an automatic stay that takes effect the same day that they file. That stay prevents creditors from continuing a lawsuit or other collection activities. How long does the automatic stay protect an individual from collection efforts?
The stay may last throughout the bankruptcy process
The history of the filer is the primary consideration when determining the length of the automatic stay. Frequently, the automatic stay lasts until the courts grant the filer a discharge or dismiss the pending bankruptcy case.
However, there are exceptions and special circumstances. If the filer has a prior bankruptcy from within the last year that the courts dismissed, the automatic stay granted could be temporary. It may end after 30 days unless the filer petitions the courts to extend their stay.
In scenarios where a filer has had two or more cases dismissed within the last year, the courts may not grant an automatic stay at all, as there is a presumption of bad faith and attempts to abuse the bankruptcy process. In some cases, creditors can also file lawsuits during the bankruptcy requesting to lift the automatic stay so that they can continue their collection activities.
An automatic stay can help people facing collection activities that could cause lasting challenges if left unaddressed. Understanding the rules that apply to personal bankruptcy filings can help people understand their protections and choose the right time to file their paperwork.