Michigan residents who follow this blog may have noticed that some posts refer to an "automatic stay" that people receive upon filing for bankruptcy. While those who read this blog regularly or who otherwise have some familiarity with the bankruptcy system may have some idea of what this automatic stay entails and why it is important for a person in financial distress to get, and keep, his or her automatic stay.
Basically, an automatic stay is a court order that prohibits a person's creditors or debt collectors from doing certain things to collect an outstanding debt from a person who files bankruptcy. For example, a creditor cannot sue a debtor in court once the creditor receives notice of the automatic stay. Furthermore, even if a creditor is already in the middle of a lawsuit, the creditor may not take further action in the suit. Even if creditor already has a garnishment in effect, the creditor must suspend the garnishment once the automatic stay comes to light.
However, the "automatic stay" is not always so "automatic." For one, a creditor can continue to collect a debt until the creditor receives notice of the automatic stay. This is why it is so important for people to list the correct names and addresses of all of their creditors when filling out bankruptcy paperwork.
Moreover, an automatic stay does not amount to a discharge, or effective cancellation, of a person's debt. A creditor can, for certain reasons, seek and obtain permission from a bankruptcy court to set aside the stay and continue with collection efforts.
While an automatic stay is an important part of the bankruptcy process, Michiganders should not assume that they will thereby get or be able to keep one just because they file for bankruptcy. For issues pertaining to the automatic stay, the assistance of an experienced bankruptcy attorney may be important.