Bankruptcy’s Automatic Stay

Automatic stay kicks in when you file for bankruptcy. This process stops all other collection efforts involving debt collection such as repossession, foreclosure, wage garnishments, collection calls from creditors, and lawsuits from creditors. This is one of the reasons why many file for bankruptcy, since automatic stay is a compelling way to put a stop to losing valuable assets. 

Automatic stay works for most people, but remember that there are also certain exceptions to it. Before deciding on the next course of action, remember to enlist the help of an experienced bankruptcy automatic stay attorney who can walk you through the bankruptcy process and provide bankruptcy relief. 

What Does Automatic Stay Prevent?

Take note that automatic stay prevents the following, albeit temporarily:

• Disconnections of Utility. Automatic stay can help prevent utility disconnections, especially if the company is threatening to disconnect water and electricity, for at least 20 days. The amount of the bill doesn’t justify a bankruptcy filing but if you have other existing debts, it can be done. 
• Foreclosure. If you are facing foreclosure, an automatic stay will put a stop to it. The next course of action depends on the type of bankruptcy you file. If you file for chapter 13 bankruptcy, you get to keep your home and catch up on payments via the payment plan. As for chapter 7 bankruptcy, the relief provided is temporary since there isn’t any other way to keep your home. 
• Eviction. Similarly, if you are facing eviction, automatic stay can provide temporary help. This has not have much power if your landlord already has a judgment of possession against you. 
• Overpayment of Public Benefits. Receiving overpaid public benefits merits collection from the agency but it can be put on hold thanks to automatic stay. 
• Wage Garnishments. Wage garnishment is the act of collecting some of your income to be used to pay off your debts. Filing for bankruptcy kickstarts automatic stay and this helps you take home a full income and discharge debt. 

What Does Automatic Stay Not Prevent?

Automatic stay can be of great help but it also has its exemptions. Automatic stay won’t help you in the following situations:

• Tax Proceedings. Even with an automatic stay, the IRS can still audit and issue tax deficiency notices and even demand tax returns. They can still issue and demand payments for assessments. Your responsibility over taxes depends after its discharge in chapter 7 bankruptcy or liquidation bankruptcy or if you have been able to pay the debt in chapter 13 bankruptcy.
• Support. Lawsuits seeking you to provide child support and alimony won’t be stopped by automatic stay.
• Criminal Proceedings. Automatic stay doesn’t prevent criminal proceedings such as if you are ordered to pay a fine. 
• Pension Loans. Money can be withheld to repay loans for pensions. 
• Multiple Filings. In bankruptcy cases, that have been pending in the previous year, the automatic stay will be terminated after 30 days unless the bankruptcy trustee or creditor asks for it to remain. 

How Does Collection Resume?

Creditors can ask bankruptcy courts to remove or lift the automatic stay. In order to avoid fines and penalties, the creditor usually files a motion that asks for consent to collect. The motions include foreclosure action, landlord/tenant disputes, and lawsuits in other courts. 

The bankruptcy court won’t automatically grant the creditor’s request but the creditor must show that maintaining automatic stay for the debtor would cause them to lose money. Upon filing the motion, the debtor has the power to oppose the motion before a judge and if the creditor makes the case, the request will be granted. Among the reasons for granting the request include: 

• The debtor cannot keep the property
• No equity that can be used to pay off other creditors
• Property liens gives the lender right to recover, sell, and use the proceeds from the home

Litigation for this part can be quite complicated which is why it is important in this case to get in touch with a bankruptcy automatic stay attorney who can help you every step of the way.