The decision to declare bankruptcy should never be taken lightly, and it's vital for you to know both the benefits and negative aspects of a chapter 7 filing. There are few more efficient ways to wipe out debt with a single action, but you probably already realize that the filing could affect your ability to get credit for years to come. Beyond those two issues, however, are other additional considerations that you need to understand before you move forward. Read on to learn more about how one of bankruptcy's most powerful tools can help you, and what the limitations are for the automatic stay.

What is the automatic stay?

Upon your federal filing, you are immediately free of all debt collection activity and more. If you are in such a dire financial situation that you are in danger of losing property, the automatic stay could bring immediate relief and puts a "stay" (or stoppage) on certain actions, such as:

1. Foreclosure: Just the thought of losing a roof over your head can bring on nightmares. If you are behind on your mortgage payments and are being threatened with foreclosure, you may get a temporary reprieve with a bankruptcy filing. The automatic stay will put a hold on foreclosure proceedings, hopefully giving you the time to get caught up on your back payments. You should have some extra money available in your budget, since you are no longer having to pay credit card payments each month. It should be emphasized that this stay is only temporary and you might still lose your home if you cannot make payment arrangements.
2. Evictions: If your landlord has already filed for an eviction in court, you may have to move out. The automatic stay can only help you if no official filing of eviction has occurred. Just like with the mortgage, make every effort to get this housing expense up to date since the stay is only temporary.
3. Wage garnishment: The debt that caused the wage garnishment to be imposed may not necessarily disappear with an automatic stay, but you will temporarily have your take-home pay restored.
4. Utility bills: If you are facing a shut-off of your electricity, gas, water, land line phone, etc, you will get a 20 day reprieve.

Don't count on the automatic stay to help much if you:

1. Owe taxes: Your federal tax debts remain, regardless of a filing. You may be able to set up an installment plan or negotiate with the IRS for a lower pay-off burden. The plus side is that no new liens on your property can be filed during the bankruptcy.
2. Owe child support: You must continue to make your child support payments and make every effort to get caught up on any back payments. Liens or wage garnishment actions will remain in place until the debt is paid.

To learn more about what the automatic stay can and cannot do, speak to a credit lawyer.