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A Brief Overview of the Automatic Stay of Bankruptcy

 Despite being a misunderstood concept, the "automatic stay" is a basic bankruptcy principle. The automatic stay typically kicks in the moment a debtor submits a bankruptcy petition. While trying to rearrange their debts and financial concerns, a debtor is protected by it from the reach and contact of creditors, which is one of the main benefits of automatic stay. 

 

Purpose of Automatic Stay  

The debtor and their creditors are both protected by the automatic stay. Debtors gain a respite from the ongoing collection efforts and can concentrate on developing a workable plan for a reorganization action without feeling undue pressure from particular creditors. Additionally, the automatic stay guarantees that all debtors are treated fairly. Without the automatic stay, the assets would most certainly be taken by the first creditors to make legal claims, leaving the other creditors with nothing. 





Preventions of Automatic Stay  

• For as long as your bankruptcy case is active, an automatic stay will stop foreclosure actions.  

• Tenants who are facing eviction may benefit from stays, although the relief is not as long-lasting as it is in the case of foreclosure. There may be a temporary reprieve from eviction, and the landlord may ask for the stay to be lifted while the bankruptcy case is still pending.  

• If you received any overpayments, such as Medicare or unemployment benefits, an automatic hold prevents creditors from taking the excess money. Notably, it does not prevent the organization that administers your benefits of automatic stay from terminating your payment.  

• A stay can stop multiple wage garnishments. If the debt that caused your wage garnishment is discharged in bankruptcy, declaring affordable bankruptcy Sarasota, Florida could permanently halt the garnishment. 

 

Exceptions to the Automatic Stay  

• A creditor is only permitted to get in touch with a debtor who is a party to an active securities transaction in order to close that transaction.  

• When the lease was completely cancelled prior to the filing of affordable bankruptcy Sarasota, a landlord may get in touch with a tenant debtor.  

• A debtor may receive communications from a local, state, or federal tax authority in order to conduct a tax audit, request a tax return, or issue a tax assessment.  

• When there is "inadequate protection of an interest in the property," such as when the value of the property is anticipated to drop significantly while the automatic stay is in effect, the court may permit a creditor to avoid the automatic stay.  

• The automatic hold does not apply to all types of debt, including alimony, child support, and restitution payments for crimes committed. 

 

Bottom Line  

One of the most potent and far-reaching federal regulations, the automatic stay in bankruptcy, has the ability to halt even the most challenging collection activities while the case is pending. After a bankruptcy petition is filed, most creditors are automatically barred from taking any further action to collect on a debt. The debtor has the right to sue any creditor or debt collector who disobeys the automatic stay. You can contact Recovery Law Group for necessary legal assistance. Their team has experts, and they will handle your affordable bankruptcy Sarasota case with professionalism. 

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