When you file for bankruptcy, you activate an automatic stay, which puts a halt to creditor harassment.
There is even more to the implementation of an automatic stay that should allow you to sleep better at night. However, it cannot solve every problem.
Keeping the lights on
Perhaps a gas, electric or water company threatens to cut off your service because you are behind on payments. An automatic stay can prevent disconnection, usually for 20 days or more.
Avoiding foreclosure and eviction
If you are a homeowner and behind on your mortgage payments, the stay will stop foreclosure, at least until your bank finds a way to continue the process. If your landlord is threatening to evict you, the automatic stay will buy you a little more time to remain in your home. Keep in mind, however, that courts often favor the landlord in disputes with tenants and a court case once instituted is likely to continue.
Stopping wage garnishment
After you file for bankruptcy protection, an automatic stay will put an end to wage garnishment until the stay is lifted.
Understanding the limitations
There are certain situations an automatic stay cannot control. For example, it will not prevent the Internal Revenue Service from auditing you or from issuing a tax assessment. However, the automatic stay will prevent the IRS from placing a tax lien against your property. Also, the stay will not help if you owe child support payments. If you are dealing with a criminal proceeding, part of which also concerns a debt you owe, the automatic stay will stop the debt, but the criminal portion will continue.