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The automatic stay gives immediate relief in personal bankruptcy

Many people in Massachusetts deliberate for months or even years before making the decision to file for personal bankruptcy. But even when a person has been thinking about it for a long time, the final decision to file often comes when a crisis hits. Perhaps they have been laid off. Perhaps they just received a notice of foreclosure on their mortgage. Or perhaps the gas or electric company is threatening to cut off service.

In all these situations, filing for bankruptcy can provide immediate protection from the actions of creditors. As soon as a bankruptcy is filed the court enters an injunction, known as the automatic stay, that prohibits most creditors from taking any action until the stay is lifted.

The automatic stay will stop lawsuits, garnishments and collection action by creditors. It can stop foreclosure proceedings; in a Chapter 13 bankruptcy this can allow the debtor time to put together a payment plan to catch up on their mortgage arrearages. The automatic stay will also temporarily prohibit utility companies from disconnecting service, typically for about 20 days. The stay will also stop all wage garnishments.

The automatic stay provides only temporary relief while the bankruptcy proceeding is pending. In limited situations creditors can petition to have the stay lifted for a particular debt. Nonetheless, the automatic stay is a powerful shield against collection agencies, landlords and mortgage companies. It effectively stops creditors in their tracks. A person who needs immediate relief from collection activity, garnishment or foreclosure can benefit by consulting a knowledgeable attorney about filing for Chapter 7 or 13 bankruptcy.

Source: findlaw.com, "The Automatic Stay: Stopping Creditors with Bankruptcy," accessed Aug. 27, 2016

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