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How does a bankruptcy filing protect the debtor from creditors?

Many people in Vancouver have overindulged in credit card purchases, and they are unable to make even the required minimum monthly payments. Caught between creditors seeking payments and lack of money to pay their debts, these individuals frequently see their situations as hopeless. Filing for bankruptcy is not a perfect remedy, but it has several advantages that can provide both short-term and permanent relief. One of the most effective such provisions is the so-called "automatic stay."

When a person files a bankruptcy petition under either Chapter 7 or Chapter 11, the petition must be accompanied by a list of all of the debtor's creditors. The filing of the petition operates as a stay against any and all collection activity by the debtor's creditors. The stay applies to many types of collection actions, including court actions, enforcement of judgments, any action to obtain possession of property belonging to the bankrupt estate or create, perfect or enforce any lien against property of the bankruptcy estate. Among the most important effects of the stay is to shut off collection efforts involving harassing phone calls or threatening letters.

A creditor can obtain relief from the stay under certain circumstances, but the request must be set forth in a written motion, to which the debtor has the opportunity to respond. The stay does not apply to certain kinds of proceedings, including paternity actions, actions involving domestic support obligations, divorce proceedings and cases involving domestic violence.

The automatic stay carries many benefits, but its complexities often require the assistance of a knowledgeable bankruptcy attorney. Anyone who wonders about the effect of the automatic stay may wish to consult a lawyer with the appropriate background.