The instant bankruptcy is filed, for either Chapter 7 or Chapter 13, a protective umbrella called the automatic stay is triggered which protects the debtor and the debtor’s property against the continuance of any action by any creditor. For example, the automatic stay would protect and STOP a pending foreclosure. Additionally, when filing a Chapter 13 bankruptcy, that injunction extends to anyone else who is obligated to repay your debts.
However, the automatic stay is not absolute in that a creditor may restart collection proceedings by asking the court for permission.
Further, there are limits on how long the automatic stay lasts. For example:
- If you had a prior bankruptcy case pending in the last year which was dismissed then the automatic stay lasts for only the first thirty (30) days after your case is filed unless you or your lawyer gets a court order extending the automatic stay; or
- If you had two or more prior bankruptcy cases pending in the last year which were dismissed then the automatic stay does not take effect at all unless you or your lawyer gets a court order extending the automatic stay.
What The Automatic Stay Covers
As long as the automatic stay remains in place, the following actions are prohibited:
- Beginning or continuing law suits;
- Collection calls;
- Repossessions;
- Foreclosure sales;
- Income executions (“garnishees”); and
- Bank account restraints.
In other words, the automatic stay is a central and very powerful tool a debtor can take advantage of once the bankruptcy is filed. The goal of any bankruptcy proceeding is to give the debtor a fresh start. The automatic stay allows for the debtor to be protected from all creditor claims while he gets his finances back in order.
What The Automatic Stay Does Not Cover
Unfortunately, not all actions and debts are covered by the automatic stay. The automatic stay does not stop:
- Criminal proceedings;
- Actions for a family support order or the modification of such order;
- Actions to collect support from property that is not property of the estate; and
- Tax audits or demands by a taxing authority to file tax returns or assessments of taxes due.
If you are thinking of filing for bankruptcy it is always best to talk with an experienced attorney to discuss your individual case. The beauty of bankruptcy is that a debtor has many options to help resolve individual problems. Only an experienced bankruptcy lawyer can help guide you through this difficult and confusing process.
Randy M. Creighton, Esq.
