What is the Bankruptcy Automatic Stay?

When bankruptcy is filed, a factor known as the automatic stay promptly stops any claims filed against you and most claims against your property by any government body, collector, or collections agency. The Bankruptcy Automatic Stay is very powerful, it is automatic in the sense that it is a court order for almost all debt collection activity to automatically stop without a judge having to sign a specific court order for your case.  The automatic stay applies to all applicable parties, even if they do not know about it (and your creditors will get notice of it from the court).  The Bankruptcy Automatic stay starts the moment your bankruptcy case is filed and is assigned a case number by the bankruptcy court.  Particularly if you’re in danger of being evicted, being foreclosed on, being found in contempt for failure to pay support payment, or losing such basic resources as utility services, welfare, state advantages, or your job due to wage garnishments, the automated stay might offer a strong reason for bankruptcy to be filed.

Elements the Bankruptcy Automatic Stay can Avert

There are certain situations that are affected by the automatic stay, like:

Garnishment of Wages and Bank Accounts, Enforcement of Liens, Putting Liens on the Debtor’s Assets:  Filing for bankruptcy prevents garnishments immediately; also, in addition to being able to receive your full salary, it is possible to settle the debt in bankruptcy. Even though only 25% for court fees or less and 50% for spousal or child support payments or less are allowed to be deducted from your wages many file for bankruptcy if there is the possibility of more than one wage garnishment.

Expulsion / Eviction From Rental Property and Homes: The bankruptcy automatic stay will usually offer temporary relief if there is a possibility of you being evicted from your home. However the new bankruptcy law makes it easier for landlords to proceed with evictions. If your landowner already includes a judgment of possession against you once you file, the automated stay won’t affect these eviction proceedings; the owner can continue even as if you hadn’t filed for bankruptcy. And if the owner alleges that you have been endangering the property or abusing controlled substances, the automatic stay won’t do you much good. In different cases, the automated stay might buy you some days or weeks, however the owner can ask the court to remove the stay and permit the eviction, which the court might be inclined to do.  It is helpful to know that the automatic stay is not lifted immediately and you would normally have ample notice allowing you to make new living accommodations.

Gathering of Excessive Charges:  If you receive public assistance and were overpaid, ordinarily the agency is authorized to collect the over payment out of your future income, but it is prevented by the automatic stay. However, if you become ineligible for assistance, the automated stay does not forestall the agency from denying or terminating advantages for that reason alone.

Utility Disconnection:  The automatic stay can forestall the disconnection if you are past due on a utility bill and the collecting company is threatening to disconnect water, electric, gas, or phone service, for a minimum of twenty days. Though the amount owed on an utility bill itself seldom justifies a bankruptcy filing, in certain cases where health is in danger, it can be enough.  Also, it is not uncommon for people in financial straits to also have problems with one or more of their utilities – and the bankruptcy automatic stay can give the filer time to catch up a utility bill before it is disconnected.

Foreclosure and Dispossessory:  The automatic stay quickly stops the proceedings if your home mortgage is being foreclosed on. However, the mortgage company / collector can typically be able to proceed with the foreclosure after making a formal request to the court and the court issues a court order lifting (terminating) the automatic stay for the mortgage company. If you’re facing mortgage loss, the Chapter 13 bankruptcy is often considered a stronger option than Chapter 7 bankruptcy if you wish to continue living in your house.  However, Chapter 13 are also best for people that can resume making a full mortgage payment along with additional payments to catch up the arrearage (missed payments) of the mortgage over a period of three to five years.

Elements the Automatic Stay Cannot Forestall; There are some instances where the automatic stay cannot be of use, such as:

Pension Loans:  Surprisingly, income can still be withheld from your financial gains to repay a loan from other forms of pensions like IRA’s and work related pensions, despite the automatic stay.

Particular Tax Proceedings:  The IRS is still capable of auditing you, issue a tax deficiency notice, demand an official document that typically leads to an audit, issue an assessment, or demand payment due to an assessment. However, the automatic stay does prevent the IRS from declaring a lien against you or seizing your property or financial gain.

Criminal Case Proceedings:  A criminal case that can be split into criminal and debt parts will be divided, and therefore the criminal element will not be stopped by the stay. For instance, if you were guilty of writing a foul check, sentenced to serve community service, and ordered to pay a fine, your accountability to try and do community service will not be halted by a bankruptcy being filed.

Different / Multiple Case Filings:  Supposing that you had a bankruptcy case unfinished in the previous year, then the automatic stay can systematically terminate once thirty days have passed unless you, a collector, or the trustee asks for the automatic stay to continue and proves that the present case was filed in honesty. If a collector had a motion to remove the automatic stay unfinished throughout the previous case, the court will most likely presume that you committed a violation of trust, and you may have to dissuade them from this presumption to keep the protection of the automatic stay in your current case.

Support Claims, Paternity, Alimony, Child Support:  A claim against you seeking to ascertain paternity or to ascertain, modify, or collect spousal or child support is not stopped by bankruptcy being filed.

The Automatic Stay Does Not Always Bar the Creditor:  Typically, a collector will get round the automatic keep by asking the bankruptcy court to get lift the stay if it’s not serving the purpose it was meant for. For instance, say you file for bankruptcy the day before your home is to be sold in proceedings. You have got no equity within the house, you cannot pay your mortgage arrears, and you have got no means of keeping the property. The foreclosing collector is likely to bring the matter to court once you file for bankruptcy and request permission to proceed with foreclosing and it is probable that the court will oblige.