When you file for Chapter 7 bankruptcy, the court issues an order called an automatic stay. This order, according to Findlaw, stops all collection actions against you, including lawsuits.
The automatic stay is one of the first benefits you receive from filing your case. It can help to put things on hold while your case is active in the court so that the court has time to process your case. In the meantime, you have this protection that prevents creditors from taking any adverse steps against you.
What it will not do
The automatic stay is powerful, but it cannot protect you completely. It will not stop some types of collections, which are typically those that you cannot discharge in bankruptcy, such as child support and tax collection. Your creditors may also ask the court to lift the stay for them if they can show the stay is not serving its purpose in their debt situation.
You should also note that sometimes the stay has a time limit. There are some debts, such as utilities, that are on hold only for a short time and not the entire length of your bankruptcy case.
What it can do
The automatic stay can protect you from some immediate issues, such as utility disconnections and foreclosure. It also can stop wage garnishments you may have from past debts or judgments.
It can allow you time to save up money and handle your obligations that will not discharge in your case. It can also enable you to stabilize your life a little so that you can begin to plan for moving forward after your bankruptcy.