When a New Jersey resident files for bankruptcy, something called an automatic stay is instituted. This means that as soon as the person filing for bankruptcy receives a case number, all creditor activity to collect a debt is required to stop.
Notification of creditors is made pursuant to court order. This is one of the biggest advantages to filing since it gives the filer breathing room to make some decisions regarding his or her finances without harassing phone calls from creditors or the risk of immediate eviction from a home — whether owned or rented.
The automatic stay will also stop any garnishment attached to a paycheck (child support is a notable exception). Harassing phone calls from creditors must also stop. Vehicles and other personal property cannot be repossessed. Any levies on bank accounts must also stop.
However, the automatic stay is not a guarantee that collection activities will not resume at some point. For instance, in the case of foreclosures, a lender can seek permission from the court to resume the foreclosure process even while the bankruptcy is still open.
An eviction may only be delayed for days or weeks, depending on where the property owner is in the process. If the court agrees that the purpose for keeping the automatic stay in place is not being met, a creditor may request that the automatic stay be lifted.
Further, the automatic stay will not stop some activities. Child support garnishments continue regardless. The obligation to pay restitution from criminal activity will not be stopped due to the filing of a bankruptcy. Loans from a pension account that are subject to garnishment are not protected by the automatic stay. Certain tax proceedings will also continue.
Consider this an overview of what the automatic stay can do for New Jersey residents when they file for bankruptcy protection. Any further questions should be directed to a professional who is familiar with the bankruptcy laws.
Source: findlaw.com, “The Automatic Stay: Stopping Creditors with Bankruptcy,” accessed Aug. 4, 2014