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Why are stays used in bankruptcy cases?

An automatic stay is something that can be issued by a court to halt another court case, at least on a temporary basis. This is something that is often done for those who declare bankruptcy, but why is it done? Before you declare, you need to know the ins and outs of the legal system, and this is an important point to cover.

Essentially, the stay is used because other cases sometimes involve debt, and that debt may not even exist when the bankruptcy proceedings are done. What is the point of carrying on a lawsuit for an issue that may be gone?

For instance, you may be facing bankruptcy because you lost your job and your home is just too expensive when considered along with your other debts. As a result, maybe you've missed some of those payments to your mortgage lender in Ohio, and now the lender has started a foreclosure case. The lender wants to take the home back.

At the end of the bankruptcy case, though, you may get rid of other debt and set up a new payment schedule that makes it so you can afford your home again. You can get caught up on the payments. As you can see, it would be a waste of time, energy and money to carry on with the foreclosure case until you know exactly how things are going to play out in the bankruptcy case.

Automatic stays are not just used on mortgages, but can be used on other financial cases, whether they involve auto loans, business loans, credit card debt, or other lines of credit.

Source: About Bankruptcy, "Removing Bankruptcy's Automatic Stay: Lawsuits and Insurance Claims," Carron Armstrong, accessed Aug. 13, 2015

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