BANKRUPTCY AUTOMATIC STAY

What you need to know about the Automatic Stay in Bankruptcy

Filing for bankruptcy relief means your creditors are no longer able to try and collect from you. They are no longer able to call you or send letters regarding your debt; they cannot sue you or garnish your wages, even if a garnishment order is already in place. This protection detailed in The Bankruptcy Code is what is known as the automatic stay provision. Very limited exceptions exist in this "stay", meaning all collection activity after filing bankruptcy is prohibited by law. Any pending lawsuits or action being taken against you is stopped.
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The Following Emergencies are Stopped by the Automatic Stay:

Foreclosure:

If you are facing a foreclosure on your home, the automatic stay will stop the action. If you find yourself in this situation, Chapter 13 bankruptcy is your best option to save your home from foreclosure. In most instances, you can file a Chapter 13 bankruptcy petition to save your home anytime prior to the sale of your home. Even a Chapter 7 bankruptcy filing will temporarily stop foreclosure action in most cases.

Utility shut-offs:

The utility companies will be required to restore your services if they have been shut off once the Automatic Stay has been entered. If you have not been shut off yet, but are in shut off status, filing bankruptcy will prevent the utility company from disconnecting you. It is possible that the utility company will require a small deposit within a reasonable amount of time after you file for bankruptcy relief. If you fail to pay the deposit, they may be able to turn off your service after you file for bankruptcy.

Repossession

Your car may not be repossessed while the automatic stay is in place. The automatic stay prevents your creditors from taking your car, however, it is only a short-term solution. You must reaffirm your car loan, or return your car in Chapter 7 bankruptcy. Chapter 13 bankruptcy may save your car, pending you make all of your trustee payments. If you fail to do so, the creditor can ask the judge to "lift the stay" so they can legally repossess your car.

Lawsuits/Garnishments:

All lawsuits or garnishments against you stop immediately when you file for bankruptcy. The automatic stay protects your paycheck and if the debt is considered dischargeable, you will most likely eliminate the entire outstanding balance in bankruptcy.

SSI/Food Stamps/Public Benefit Overpayments:

If a government agency, such as a public assistance agency, overpaid you at any time, that agency can collect the overpayment unless there is an automatic stay in place. If it is in place, the agency may no longer try to collect on the overpayment and the debt will be abolished unless the government agency is able to prove the overpayment was a result of fraud.

Tax Levies:

The IRS may not issue a tax levy or seize your property to satisfy any delinquent tax debts if the automatic stay is in place. However, they can still audit you, demand you file your tax returns, assess tax liabilities and demand you pay the assessment.

The Following Will Not Stop With The Automatic Stay:

Criminal Proceedings:

Any criminal charges pending against you will not be stopped by the automatic stay. You will still be responsible for any court fines and fees entered against you. If you've been charged with a crime, call us to consult with a criminal defense professional in your area as soon as possible. If a criminal action can be divided into a criminal and debt liability case, the automatic stay may prevent the creditor from collecting on the debt.
Support Actions. Any lawsuits pending against you that are seeking to establish paternity, or to establish, change or collect child or spousal support will NOT be stopped by the Automatic Stay.

The Automatic Stay is Effective Until:

Though unlikely, there are certain limited circumstances that may prevent the automatic stay from going into effect after you file for bankruptcy, or that may require your bankruptcy professional to file a motion to keep it in effect. These generally apply to people who have filed more than one bankruptcy case.  Our bankruptcy professionals can help you figure out if any of these limited exceptions apply to you and your bankruptcy case.