One of the most important parts of filing for bankruptcy is the automatic stay. It’s so important we thought it probably deserved a post all to itself.
The purpose of the automatic stay is to give the bankruptcy case time to proceed and resolve without causing any new issues. This protection also exists to give you a breather.
This vital protection is yours whether you file for Chapter 7 or Chapter 13, though there are some exceptions (see below). Here’s what you need to know.
What the Automatic Stay Does
The automatic stay stops all collection activity. This includes:
- Collection calls and letters
- Lawsuits
- Repossessions
- Foreclosures
- The creation of liens
- Evictions (most of the time)
- Garnishments
- Utility disconnects
The actual code is much longer and more in-depth. But for all practical purposes this is what the automatic stay will look like from your point of view. Where the phone had been ringing off the hook, non-stop, day and night, there will be silence. Where you once feared losing your car, you can drive to work.
This is not to say you will be able to keep the house or the car in the long run, depending on what you do, but that’s a reason why you want a bankruptcy attorney. To help you keep those things.
Who the Automatic Stay Impacts
The automatic stay impacts just about every creditor you have. If they want to continue to harrass you they’ll have to appeal to a judge. If they continue collection activities without a judge’s express permission the court can take action against them. This can include ordering them to pay damages.
See also: Does An Automatic Stay Stop Credit Reporting in New Jersey?
What the Automatic Stay Doesn’t Cover
An automatic stay won’t stop criminal cases from going forward, nor will it stop child support enforcement actions. Remember, neither criminal restitution nor child support can be discharged through bankruptcy.
It also can’t stop an eviction if a judge has already issued a “judgement of possession” in an eviction action.
Loans against your 401K account are also handled differently than most other loans under the automatic stay. This is mostly because your contributions to the 401K are tax-exempt, and because you technically borrowed for yourself. The combination of these two factors makes everything a bit more complicated.
Finally, while tax collection is handled under the automatic stay it can’t stop tax assessments. The IRS can also continue to demand tax returns from you.
How to Handle Creditors Who Call After the Automatic Stay is in Place
There’s a bit of lag time between the time the automatic stay goes into effect and all your creditors receiving notification. Some will call by mistake. Usually if you give them the name of your bankruptcy attorney and your bankruptcy case number they’ll leave you alone.
If you have a creditor who knowingly and willfully violates the stay, reach out to us. We can help you take the next steps.
See also: How to Deal with Collection Calls.
How One Might Lose an Automatic Stay
You can lose the automatic stay protection if you file bankruptcy multiple times. If you’ve filed bankruptcy within a year of the current case your stay will only last thirty days. If you filed bankruptcy twice in one year you don’t get the stay at all.
This is one reason why it’s very important to make sure your bankruptcy case doesn’t get dismissed if at all possible. A bankruptcy without the automatic stay isn’t nearly as powerful or helpful.
More questions? Call us.
If you want the automatic stay to do its job it’s important to have a qualified bankruptcy attorney by your side for the entire duration of your case.
Fortunately, we make it easy. We offer free consultations. We’ve taken steps to make our expertise affordable and easy to take advantage of. And we’re available 24 hours a day, so you can call no matter what time it is. Call now to get the help you need.