The great and powerful automatic stay

The Greatest Benefit Of A Bankruptcy Is The Automatic Stay

The greatest benefit of filing a bankruptcy is that an automatic stay immediately comes into effect. This basically means that creditors must stop any type of collection efforts against you regarding any claims that they may have had prior to your filing. Activities anywhere from telephone calls to the filing of lawsuits or their continuation are prohibited. If a creditor wants to continue collection efforts against you, then it must be first obtain the court's permission by getting relief from stay. The court does not easlily grant relief from the automatic stay. The stay will generally not be lifted except for cause. So the court is given considerable discretion, but lack of adequate protection payments are typically the type of cause that will be needed to lift the stay. For instance, a creditor or a collector wanting to continue trying to collect on an unsecured debt generally will not be granted relief. The typical type of situation where releif from the automatic stay is granted is where a secured creditor's security is in jeopardy or at risk. This would typically cover a situation where there has been a lack of adequate protection payments, such as mortgage payments or car payments. The stay is almost always lifted in a Chapter 7 if you are delinquent on your mortgage payments or car payments. If you are in this position and you want to keep your property, then you should either file a Chapter 13 or convert your Chapter 7 case to a case under Chapter 13. As long as a debtor is making a reasonalbe effort, it is extremely difficult for a creditor to obtain releif from the automatic stay. 

 

Various Exceptions To The Automatic Stay

The Bankruptcy Code lists specific situations where the automatic stay does not come into effect and the creditor is free to proceed despite the filing of any bankruptcy. There are a variety of exceptions to the automatic stay. Many people would not find themselves in the types of situations that would give rise to an exception to the automatic stay. However, the more common scenarios in which an action would be allowed to proceed are:

1) the commencement or continuation of a criminal prosecution;

2) many family law proceedings, such as the establishment of paternity, establishment or modification of support, child custody, divorce, except to the extent of any division of marital property and domestic violence such as a protection from abuse action;

3) the suspension or restriction of a driver's license or a professional or occupational license;

4) the interception of a tax refund; and

5) withholding monies from your paycheck to make payments on a retirement loan that was taken against your pension.

As previously stated, the filing of a bankruptcy provides a tremendous benefit of an automatic stay, and despite the many exceptions, most people are fully protected.

 

Restrictions On The Automatic Stay Due To The Dismissal Of Prior Bankruptcies

The stay is somewhat restricted by the filing of a prior bankruptcy, if that bankruptcy was dismissed within the past year. If you had one bankruptcy dismissed within the past year, then you only get an automatic stay for 30 days. If you have had two bankruptcies dismissed within the past year, then you do not receive an automatic stay nor any of the benefits that would normally flow from it. It is necessary for you to convince the court that there has been a substantial change in circumstances from those that existed in your case that was dismissed. Upon that showing, the court will generally extend the automatic stay beyond the 30 days or even re-impose the stay. These limitations are not as significant in a Chapter 7, although that does not mean that there would never be any circumstances where you might want to have the automatic stay extended. However, in a Chapter 13 you would almost always want to have the stay extended since you are wanting to stop your mortgage company from foreclosing on your house or your automobile lender from repossessing your car.

 

Violations Of The Automatic Stay

In the event that a creditor does violate the automatic stay, then the debtor is not without recourse. Any actions taken that are in violation of the stay are simply void and are of no effect. It does not even matter whether the creditor had knowledge of the automatic stay. A creditor who has caused injury to a person by its willful violation of the stay can be held responsible for actual damages, as well as any costs and attorney fees. In appropriate circumstances, even punitive damages may be awarded. All that is required is actual notice of the bankruptcy filing.

 

People Who Have Cosigned Or Are Jointly Responsible On A Debt

The automatic stay generally protects only the person filing and their property. In situations where someone may have cosigned a loan for you or is jointly responsible on a debt with you, the filing of your bankruptcy will generally not protect them. Should you file a chapter 7, the creditor is still free to pursue them. However, upon the filing of a Chapter 13 a co-debtor stay comes into effect and any actions against the other person are stayed if your Chapter 13 Plan proposes that the co-signed debt will be paid in full.

 

Long-Term Effectiveness Of The Automatic Stay 

The automatic stay will only protect you with respect to debts that were incurred prior to the filing of your bankruptcy. However, a debt that arose after the filing can be enforced against the debtor without the creditor being considered to have violated the stay. This stay not only protects you from the debts that you incurred prior to your bankruptcy filing while in the bankruptcy, but permanently continues upon the completion of your bankruptcy. Any action taken to hold you personally liable is a clear violation, which may also give rise to an action for damages, costs and attorney fees.

 

Knowledge And Experience You Can Count On

Filing bankruptcy is a great way to get a fresh start, but even more so it is a great way to put your worries behind you.  An automatic stay comes into effect that prevents your creditors from harassing you. In fact, it is illegal for them to ever contact you again.  Attorney Rodney D. Shepherd has the knowledge and experience to guide you through this process, and make that become a reality.  Call him today at 412-471-9670 or fill out the online contact form.