THE POWER OF BANKRUPTCY'S AUTOMATIC STAY Linda Ghazarian, Julian Credit Management

After you file, the law offers potent legal protection against bill collectors

When you file for bankruptcy, something called the automatic stay immediately stops any lawsuit filed against you and virtually all action against your property by a creditor, collection agency or government entity. Especially if you are at risk of being evicted or foreclosed on, being found in contempt for failure to pay child support or losing such basic resources as utility services, welfare or unemployment benefits, your driver's license or your job (because of a raft of wage garnishments), the automatic stay may provide a powerful reason for filing for bankruptcy.

Here is how the automatic stay affects some common emergencies

FORECLOSURE

If your home mortgage is being foreclosed on, the automatic stay temporarily stops the proceedings, but the creditor will often be able to proceed with the foreclosure sooner or later in a Chapter 7. If you are facing foreclosure, Chapter 13 bankruptcy is usually a better remedy than Chapter 7 bankruptcy if you want to keep your home. Chapter 13 gives you the opportunity to catch up on your back payments over a 3 to 5 year period.

EVICTION

If you file Chapter 7, and you are being evicted from your home, the automatic stay can usually buy you a few days or a few weeks. But if the landlord asks the court to lift the stay and let the eviction proceed which landlords usually do the court will probably agree, reasoning that eviction won't affect the bankruptcy. Despite the attractiveness of even a temporary delay, it is seldom a good idea to file for bankruptcy solely because you're being evicted. You'll be better off looking for a new place to live or fighting the eviction in state court, if you have a defense. In a Chapter 13, reorganization allows you to catch up back rent payments through a Chapter 13 plan.

PUBLIC BENEFIT OVERPAYMENTS

If you receive public benefits and were overpaid, normally the agency is entitled to collect the overpayment out of your future checks. The automatic stay prevents this collection; furthermore, the debt (the overpayment you owe) is dischargeable unless the agency convinces the court it resulted from fraud on your part. Whether or not the threatened collection of an overpayment justifies bankruptcy depends on how severely you'll be affected by the proposed reduction in benefits.

MULTIPLE WAGE GARNISHMENTS

Although no more than 25% of your wages may be taken to satisfy court judgments (up to 50% for child support and alimony), many people file for bankruptcy if more than one wage garnishment is threatened. For some people, any loss of income is devastating, also, some employer get angry at the expense and hassle of facilitating a succession of garnishments and take it out on their employees. Although federal law prohibits you from being fired for one garnishment, an employer can fire you for multiple garnishments. Filing for bankruptcy stops garnishments dead in their tracks. Not only will you take home a full salary but you also may be able to discharge the debt in bankruptcy.

Julian Credit Management is a firm that practices exclusively in the area of Bankruptcy and Debt Consolidation and has offices in Clearwater (Pinellas County), Port Richey (Pasco County), Tampa (Hillsborough County), Lakeland (Polk County) and Orlando (Orange County). We represent persons throughout the State of Florida.

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