Most Americans love to have as much credit as possible because it makes life so much easier. Credit is a double-edged sword, however, because it can tempt to people into living beyond their means, and if they amass a lot of debt, and then they lose their job or their revenue source is cut off for any reason, then they start defaulting on their debt repayment plans.
This can lead to declaring personal bankruptcy. As part of the personal bankruptcy process, something called an "automatic stay" is put in place to stop all credit collection proceedings while the person's bankruptcy and financial situation is figured out.
What Is an Automatic Stay?
Automatic stays are a critical and early step in a person's process of declaring bankruptcy. An automatic stay, which is basically a type of injunction, protects a person's assets and income while the bankruptcy process figures out how the person should proceed financially.
An automatic stay puts a stop to a creditor's attempts to get the money they are owed, whether it's through relentless phone calls, lawsuits, the garnishing of wages, or other means of debt collecting at the creditor's disposal. An automatic stay has no bearing on the eventual outcome of a person's bankruptcy process, all it does is create breathing room for the bankruptcy court to straighten things out.
Needless to say, creditors take a pretty dim view of an automatic stay since it forbids them from getting their money back. The up side for creditors is that it could very likely end up with each creditor getting at least something back, as opposed to just one creditor getting all the person's assets and the other creditors getting nothing.
To learn more about automatic stays, debt collection, creditors, bankruptcy, and other financial topics, be sure to consult with a financial professional. He or she can advise you on how to avoid bankruptcy and automatic stays, as well as give you their professional opinion should you already be at the bankruptcy phase.
