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What can an automatic stay do to help debtors in Long Island?

Sometimes a person in Long Island finds him or herself in a position where he or she is overwhelmed with debt. The stress of even trying to figure out how to pay for one's daily living expenses is compounded when one is facing foreclosure, having their wages garnished or having their utilities turned off. What debtors may not realize, however, is that there is a way to stop such actions: the automatic stay that is set off once the debtor files for either Chapter 7 or Chapter 13 bankruptcy.

The automatic stay can be incredibly helpful. First of all, it can save a debtor from foreclosure, at least during the bankruptcy process. An automatic stay puts a halt to any foreclosure proceedings, at least temporarily. Debtors who wish to keep their homes may want to file for Chapter 13 bankruptcy, as a Chapter 7 bankruptcy liquidates the debtor's assets including possibly the debtor's home, with some exceptions.

An automatic stay can also keep a debtor from having his utilities, such as electricity, gas or water turned off. If a debtor has been unable to pay his or her electric, gas or water bills, the utility company may threaten the debtor that they will disconnect these services. An automatic stay can prevent this from happening for 20 days.

Finally, if a debtor is having his or her wages garnished, an automatic stay can stop that, at least until it is the stay is lifted. This may be the impetus that encourages some individuals to file for bankruptcy, as it allows them to keep their whole paycheck.

However, keep in mind that certain creditors, such as debt collectors and credit card companies, may be able to continue trying to collect on the debts despite the automatic stay. They can do this by requesting the court to have the automatic stay "lifted," that is, removed. In order for this to happen, the creditor needs to be able to demonstrate that the intended purpose of the automatic stay is not being served.

Despite that, most debtors who file for bankruptcy welcome the automatic stay. It can relieve some of their stress, so they can focus on overcoming their financial challenges through bankruptcy, allowing them to move forward on a clean financial slate.

Source: FindLaw, "The Automatic Stay: Stopping Creditors with Bankruptcy," accessed Aug. 1, 2016

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