When you file bankruptcy, the court will issue an automatic stay. According to Cornell Law School, this is a hold that goes in place to prevent creditors from trying to collect debts from you.
The automatic stay helps to keep your case organized because it stops almost all actions, leaving the court with a clear, unchanging picture of your financial situation. It also prevents the loss of assets that the court may use to help repay your debts.
Stops almost all collection
The stay will prevent creditors from contacting you about debts or trying to collect on debts. It stops and court cases against you for unpaid debts. It prevents creditors from acting in any way to try to recover payment from you, including foreclosure or repossession. No creditor can file any new court case against you. It suspends all activity to ensure nothing occurs until the bankruptcy court decides your case.
Exemptions
There are exemptions to the automatic stay, which largely includes those things that bankruptcy will not affect. For example, if you owe child support and do not pay it, the agency can still work to collect it and even take you to court for it. The same is true for any spousal support orders you have. Some tax collection may also still proceed.
If you file for bankruptcy during your divorce, it may put your divorce on hold if the bankruptcy court believes the division of property could impact your bankruptcy case. If you have already completed that part of y our divorce, then it may continue under the stay.
