Bankruptcy helps consumers in Louisiana get some of their unsecured debts forgiven through liquidation or repayment. If consumers get behind on debt, they could get calls from collectors. However, the automatic stay of bankruptcy is beneficial in this situation.
Overview of the automatic stay
The automatic stay is an injunction in all bankruptcy chapters that prohibits collectors from taking legal action against consumers. It temporarily stops wage garnishments, foreclosures and pending litigation from government entities, mortgage lenders and collection agencies. It may stop certain tax proceedings if the IRS has been listed on the petition, but not all tax debt can get discharged.
The automatic stay is effective as soon as the consumer files and until the discharge, which depends on the bankruptcy type. However, the automatic stay only last 30 days if the filer has a pending bankruptcy within one year of the last filing. If they have two pending cases within the same year, they don’t get any protection unless they have a valid reason.
Past-due utilities
If past-due utilities are included in the petition, it prevents shutoff for 20 days or longer with adequate payment assurance. However, regardless of the limit given, the filer must provide the adequate assurance within 20 days of filing. This may include a letter of credit, a security deposit or prepayment, but what companies will accept varies.
If the utility company won’t accept the form of adequate assurance, the court may force them to accept it. If consumers only have utility debt or the court doesn’t force acceptance, there are some other options. Many states offer assistance to low-income households and seniors, in addition to negotiating discounts, or prevent shutoff during extreme weather.
Bankruptcy cannot be filed for one debt, so consumers may need to look for alternatives depending on their situation. A bankruptcy filing also can affect credit for several years, so it should be used as a last resort.
