The Bankruptcy Automatic Stay
After filing bankruptcy under Chapter 7, Chapter 13 , Chapter 11 or any other type of bankruptcy, an automatic stay may kick in. If it does, it will automatically halt all attempts by creditors to collect on debts, including existing lawsuits, car repossessions, and wage garnishments. If an automatic stay goes into effect and any creditor continues with collection efforts, a person can take legal action through the bankruptcy court.
Whether a stay is granted, or whether it will be automatic, will depend on how many bankruptcies have been filed within the previous year. If the stay in not automatic, a bankruptcy attorney can offer advice on how to file a motion for additional stay protection.
When a Creditor Violates the Automatic Stay
If a creditor continues to harass even with an stay in place, an attorney may file a motion for contempt for violating the automatic stay or injunction. If found in contempt of court, the creditor will be legally required to reimburse any attorney’s fees associated with filing the motion. If the creditor was willfully harassing a debtor, the contempt action may include an additional claim for punitive damages where the creditor may have to pay the individual a monetary amount.
If the creditor seized property or took actions to change titles to property, any of these actions can be reversed by the bankruptcy court as well. For example, if a finance company repossesses a vehicle in violation of an automatic stay, the bankruptcy court can require that they return the vehicle to the owner. Multiple options are available through the Bankruptcy Code to provide you protection from abusive creditors. Some states also provide additional protection through their deceptive trade practice and debt collection laws. Consult with a bankruptcy attorney in your area to see which options are best for your situation.
A creditor may be in violation of an automatic stay if they: File a new lawsuit or continue to press a lawsuit that has already been filed, send letters or make phone calls in an attempt to collect a debt, file a financing statement to perfect a security interest, refuse to issue a school transcript, or suspend a driver’s license.
Exceptions to Automatic Stay Protection
There are exceptions to automatic stay protection. These exceptions include criminal prosecution, paternity proceedings, litigation to collect child support or alimony, repaying a loan from certain types of pensions, and IRS audits are not stopped.
With residential real estate leases, landlords are free to complete evictions if he or she already has a judgment of possession. A landlord can also file for eviction after the bankruptcy is filed based on endangerment of property or use of illegal substances on the leased premises. Moreover, the automatic stay doesn't stop or postpone actions to suspend driver's licenses and revoke professional licenses related to a prosecution by a governmental unit, like the state attorney general's office.
How Long Will the Automatic Stay Remain in Effect?
An automatic stay will normally remain in effect for the duration of the bankruptcy with one exception. If you filed for bankruptcy at any time during the year prior to the current filing and had that case dismissed before completion, an automatic stay on the current filing will only last 30 days. This is designed to prevent people from taking advantage of the system (i.e. - to stop people who don't really intend to file for bankruptcy but who are simply using the automatic stay for protection).
Lifting an Automatic Stay
In some cases, particularly those where the case may be taking longer than usual to complete or where a debt has particular urgency for some reason, a creditor can request that the judge lift the automatic stay for them, meaning that this one creditor would be legally allowed to pursue the debts they are owed. This can only be done with good reason and by a judge's order.