When people think of the benefits of bankruptcy, the most common one they discuss will likely be the discharge of unsecured debt. Not needing to repay your debts after completing a bankruptcy filing is certainly beneficial, but it is far from the only benefit available to those who file for Chapter 7 bankruptcy.
The automatic stay is a protection that can be a motivating factor in people initially filing for bankruptcy. After all, bankruptcy is frequently the last resort for people, so they may only file when they suddenly need an immediate halt to aggressive collection activities, such as a potential lawsuit from a creditor.
How does the automatic stay work?
When you initially file for bankruptcy, you submit a petition to the court. The date of that initial petition is the date that your automatic stay takes effect. Creditors have to cease collection activity until you resolve your bankruptcy filing. That means the dismissal of pending lawsuits until the resolution of your bankruptcy, as well as the end of all those borderline-threatening phone calls.
Most collection companies and large businesses that engage in lending will routinely update their internal records to reflect anyone who has a pending bankruptcy or a recent discharge. However, it is possible you may have to inform creditors of the automatic stay when they call.
Once the creditor knows about your automatic stay, they cannot contact you again or attempt to collect on the debt until the courts resolve your bankruptcy. If they granted and you secure a discharge, that will mean the permanent end to collection activity from those creditors.