When consumers in Mississippi and around the country file for bankruptcy, an automatic stay is issued that requires lenders, debt collectors and government agencies to cease all of their collection efforts. In addition to preventing property from being repossessed and homes being foreclosed upon, the automatic stay halts debt-related lawsuits and wage garnishments. It also orders creditors to cease making contact with debtors for the purpose of collecting unpaid obligations. Automatic stays are court orders, which means violating them is considered contempt of court.
Protecting debtors and creditors
Automatic stays protect both debtors and creditors during a bankruptcy. They protect debtors from lawsuits, asset seizures and daily harassment from creditors, and they prevent one creditor from taking action to recover monies owed to them before others have an opportunity to do the same. Creditors can petition the court to have automatic stays lifted, but these actions are rarely successful unless the debt involved is secured by an asset that is not actually owned by the debtor or is likely to depreciate significantly in value during the course of the bankruptcy.
Automatic stays usually remain in effect until bankruptcy cases are either dismissed or discharged, but exceptions are made when debtors file a second bankruptcy while their first case is still pending. In this situation, the second automatic stay will only remain in effect for 30 days. When a debtor files a third bankruptcy petition within a 12-month period, an automatic stay is only issued if the judge feels that doing so would be reasonable given the circumstances.
Escaping from overwhelming debt
The United States Bankruptcy Code was written to give people a way to escape overwhelming debt, and automatic stays are tools that are designed to protect them from further harm as they pursue fresh starts. The goal of the bankruptcy process is to leave debtors in a position where they have a realistic chance of avoiding major financial problems in the future, and the automatic stay helps them to achieve this goal by protecting their property and sources of income from garnishments, repossessions, foreclosures and lawsuits.