The Effect of the Automatic Stay in Bankruptcy: Benefits, Exceptions and Limitations

town-sign-96612__340-300x225Bankruptcy provides relief to a debtor who may be struggling to keep a house, keep the lights on, or pay credit card or medical bills. The relief provided is in the form of an automatic stay, exemptions to protect your most essential assets, and a discharge of a portion of the debtor’s debts. It is important to determine to understand the benefits and limitations of the relief that bankruptcy provides before you make the decision to file for bankruptcy.

  1. Benefits of an Automatic Stay.

The automatic stay is the first form of relief provided after a debtor files for bankruptcy. The stay stops almost all collection actions by creditors to allow the debtor time to reorganize, rehabilitate, and prepare for the fresh start that bankruptcy provides. The following are examples of the actions which a debtor’s creditors must cease as a result of the automatic stay:

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