How can the Automatic Stay help?
An automatic stay is initiated immediately when you file Chapter 7 or Chapter 13 bankruptcy and can allow a debtor time to reorganize their finances without creditor harassment. The automatic stay will temporarily stop most creditor actions against you including actions by the government, a collection agency, or a creditor. It also will stop evictions, foreclosures, lawsuits and wage garnishments.
Consider, however, the automatic stay will not necessarily last forever. For instance, some creditors will be able to request that the court lift the stay. If the court grants the motion, the creditor can continue their collection efforts against you. In many cases, however, the court may allow the bankruptcy protection to continue, especially if the request is for unsecured debt which will be included in the debtor's discharge.
When will the court lift the automatic stay? The most common reason the automatic stay will be lifted is if you are not making payments on a secured debt. For instance, if a mortgage lender has started foreclosure proceedings on your home and you are filing bankruptcy, to have the automatic stay enforced you would need to pay your mortgage back payments or show that you have a plan to make the payments current. This can all be done through a Chapter 13 bankruptcy repayment plan.
If you have a Chapter 13 bankruptcy plan approved by the court, the court is likely to deny the motion. If, however, you are filing Chapter 7 bankruptcy and you are behind on your mortgage, your mortgage lender is likely to ask the court to lift the stay so it can continue with foreclosure.
When an automatic stay will not help you
Filing bankruptcy will not discharge all types of debts. An automatic stay will also not stop all debt collection efforts. Contact a lawyer if you have questions about the most common debts which will not be impacted by an automatic stay including:
- Child or spousal support
- IRS tax actions
- Criminal actions
- Legal actions for domestic violence
- Legal actions seeking to establish paternity
- Divorce cases
- Many administrative actions (such as suspending driver's licenses or professional licenses, etc.)
- Repayment of certain pension loans
If you have filed for bankruptcy protection and the creditor continues to try to collect debts you can notify the bankruptcy court. The creditor may be sanctioned of face more severe action if the violation was willful. A willful violation occurs if they continue creditor actions even when the automatic stay order was in force, or they knew about the bankruptcy case and intentionally ignored it. Actions against the collector can include requiring them to pay fines, assessing attorney's fees, or ordering the collector to pay damages. Punitive damages are not available.
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After filing bankruptcy certain property may be protected through your state's bankruptcy exemption laws.