Texas consumers who are behind on their financial obligations may get calls from creditors or other attempts at bill collection. In some cases, the creditor could try to sue them for the debt. A debtor has the option to file bankruptcy, a legal process to discharge some debts, which gives them the benefit of the automatic stay.
How automatic stay works
The automatic stay under the U.S. Bankruptcy Code offers consumers protection by ceasing further collection attempts by creditors, including wage garnishment. Under Chapter 13 bankruptcy, which requires the debtor to pay debts through a payment plan, it halts foreclosure. Since Chapter 7 requires the liquidation of non-exempt assets, it only provides temporary relief.
The provision halts disconnection of utilities for at least 20 days, but future connections may require a deposit to the utility company. It stops evictions temporarily, unless the landlord has already filed judgement against the tenant or the tenant has been destructive or uses illegal substances. The provision does not stop tax liens, audits, pension loans or criminals proceedings.
Creditor objections to the automatic stay
Creditors can request that the court remove the stay in many situations. For example, a creditor could ask the court to lift the stay if the debtor has fallen behind on payments and lack enough equity in the property.
While it is rare for a creditor to request a lift of the stay in Chapter 7, they could request it for an unsecured non-dischargeable debt. The creditor still must prove that lifting the stay will not impact the outcome in court for other creditors. The debtor can challenge the removal of the stay at the hearing and sue creditors who continue harassing or attempting to collect. Filing for bankruptcy can provide people with a fresh financial start.