The Bankruptcy Automatic Stay
Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.
The Bankruptcy Automatic Stay
The Automatic stay Section 362 of the Bankruptcy Code provides for an immediate federal injunction of creditor collection actions upon the filing of your bankruptcy petition. It works to immediately protect both you and your property from a variety of collection attempts. Likewise, pending foreclosure, wage garnishment, car repossession, collection calls, civil lawsuits and many other actions by creditors to collect debt. It can even stop eviction in its tracks if your landlord hasn’t yet obtained final judgement of eviction against you.
The Automatic stay is a significant and powerful tool that takes effect upon filing your bankruptcy petition. Moreover, it can provide you with the immediate relief you need from aggressive creditors trying to collect from you. Most debts and collection efforts are protected by the automatic stay (but there are some exceptions), and unless a creditor gets federal bankruptcy court approval to have the stay “lifted” (or removed) on their particular collection efforts, the automatic stay will continue to protect you throughout your bankruptcy case until such time that the bankruptcy court orders a discharge of your debt or otherwise closes the case. Although most collection efforts are precluded under the automatic stay, there are some exceptions. Call us today for a better understanding of how the automatic stay may be able to help you.
Violations of the Bankruptcy Automatic Stay
For a creditor to be subject to the automatic stay, the creditor must have actual notice of your bankruptcy case. Most common way to provide this notice is to include creditor on your bankruptcy schedules, with proper noticing address. By properly including a creditor in your bankruptcy schedules, the clerk of the bankruptcy court will add their address to the official mailing matrix in your bankruptcy case. This ensures that the creditor receives actual notice of the bankruptcy case and providing sound proof of such. Once a creditor has actual notice of your bankruptcy case, the creditor must obey protections afforded under automatic stay. If a creditor continues their collection efforts and disregards the automatic stay, they are essentially disregarding a federal court order. Which would allow us to pursue damages and sanctions against them, depending on the severity of the situation.
Exceptions to the Automatic Stay
As powerful a tool as the automatic stay is, it does have some limited exceptions. These exceptions to the automatic stay are outlined in Section 362(b) of the Bankruptcy Code. It includes things like: the commencement or continuation of criminal proceedings against you; actions around paternity, domestic support obligations (like child support) and dissolution of marriage (except as related to the division of property); and collection attempts related to debts from creditors that were not listed in your bankruptcy schedules and did not receive actual notice of your bankruptcy filing, or in regards to debts that you incurred after you filed your bankruptcy petition (these are referred to as “post-petition” debts, and these post-petition debts are not subject to either the automatic stay or the Order of Discharge).
These are probably the most common examples of exceptions to the automatic stay, but there are others. Call us today to learn more about what the automatic stay does and does not protect against. Moreover, how a bankruptcy filing and the automatic stay may be able to help you.
Motion for relief
In addition to the exceptions specifically outlined in the Bankruptcy Code, creditors may also file a Motion for Relief from the automatic stay in your bankruptcy case. The motion will have to be heard by the bankruptcy court and the bankruptcy judge will decide if relief from the automatic stay should be granted.
Motions for Relief from the automatic stay are sometimes filed by creditors seeking to continue a civil lawsuit against you. This is typically for the foreclosure of a property that you are not “treating” or “adequately protecting” in your bankruptcy case (secured property is often treated in a Chapter 13 Plan, or a Chapter 11 Plan, and there are rules around minimum amounts that must be paid and the timing of such. This is referred to as “adequate protection”). Of course, you will be notified of the hearing date, time and place, and will have an opportunity to attend. The creditor remains subject to the automatic stay and may not act against you or your property. But until the matter is heard and the bankruptcy court makes a final ruling.
If the creditor takes action on a debt that is not specifically excluded from the stay, or in which the bankruptcy court has not specifically lifted the automatic stay, there could be very serious and severe consequences, in the form of both actual damages and even punitive damages.
Automatic Stay Essentials
In order to reap the maximum benefits from your bankruptcy filing and the protections of the automatic stay, you should consult with an experienced bankruptcy attorney. Our bankruptcy law firm offers free phone consultations. We would love to help guide you through a successful bankruptcy that meets your objectives while minimizing your risk. Call us today to set up your free phone consultation and to learn more about how bankruptcy may help you.
Through our guidance, we can help advise you to maximize benefits you receive through a bankruptcy filing while minimizing risks. For instance, the timing of your bankruptcy could be critical. That could be the difference between stopping a foreclosure sale and developing a plan in bankruptcy to save your home vs. filing too late and losing your home to foreclosure. The same is true in connection with the timing of a bankruptcy filing to save your car from repossession. Or, to put a halt to aggressive lawsuit, prior to a critical hearing and the entry of a final judgment. Call us today to speak with an experienced bankruptcy attorney and understand the remedies available to you through Bankruptcy Code.
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