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Bankruptcy May Be Your Option

How an automatic stay in bankruptcy can help you

The moment that you declare bankruptcy, something called an automatic stay kicks in. This means that creditors must immediately stop trying to collect from you. The automatic stay can be very beneficial for people struggling with debt, though it does have some limitations.

The automatic stay can be a very powerful tool. Under U.S. bankruptcy law, when you file for either Chapter 7 or Chapter 13 bankruptcy, the automatic stay prohibits most creditors, collection agencies, and government entities from continuing collection actions from you. 

First, an automatic stay can stop your utilities from being turned off. Utility companies often threaten to turn off your service if you are behind on your bills. An automatic stay can stop the company from disconnecting your service for at least 20 days.

An automatic stay can also stop foreclosure proceedings or stall eviction proceedings. Keep in mind, however, that an automatic stay may not help in every situation. For example, it may not prevent a landlord from evicting you if you already had a wrongful possession judgment issued against you. Moreover, the automatic stay may not stop a proceeding altogether. It may only buy you some time before the foreclosure or eviction proceedings continue.

Another benefit of an automatic stay is that it can stop your wages from being garnished. This is particularly helpful for people who have multiple garnishments. By filing for bankruptcy, you may be able to keep your entire paycheck. Again, there are limits. If you took a loan from your pension, an automatic stay cannot prevent garnishment of your wages in order to repay that loan.

There are other situations in which an automatic stay cannot help you. It cannot prevent a lawsuit to collect child support from you. It also cannot help if the IRS plans to audit you or is issuing a tax deficiency against you.

Even if none of these situations apply, creditors can still get around the automatic stay by asking a court to remove it. Under Oklahoma law, this is called relief from the automatic stay.

This post is intended only to introduce you to the concept of the automatic stay. It is important that you understand all of the pros and cons of declaring bankruptcy. To find out whether bankruptcy is right for you, you should speak with an experienced attorney.

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