Chat with us, powered by LiveChat

When someone files for bankruptcy, they receive what is called an automatic stay. The automatic stay is a powerful tool which prevents creditors from collecting debts from the bankruptcy estate while the bankruptcy is in progress. For example, a creditor might be threatening to repossess your car because of your failure to pay a car loan, but after the automatic stay kicks in the repossession process will be stopped dead in its tracks. The purpose of the automatic stay is to give the bankruptcy debtor a break from the hounding of creditors and let them have a chance at a fresh start.

What Will the Automatic Stay Stop?

The automatic stay will protect debtors from many of the various ways creditors use to collect debts. Specifically, it will stop:

  • Beginning or continuing judicial proceedings against the debtor
  • Actions to obtain debtor’s property
  • Actions to create, perfect or enforce a lien against a debtor’s property
  • Disconnection of Utilities
  • IRS tax levies/IRS seizures
  • Wage garnishments
  • Collection of overpayments of benefits from a governmental agency

Creditors will willfully violate the automatic stay can be sanctioned with damages, costs, attorneys’ fees and, under certain circumstances, even punitive damages. Once a creditor has notice of the automatic stay, they must abide by it or face the consequences.

What Will the Automatic Stay Not Stop?

The power of the automatic stay is potent but not unlimited. There are several actions which the automatic stay will not stop. These include:

  • Actions to collect child support or determine paternity.
  • Actions to collect alimony.
  • Criminal proceedings filed against the debtor.
  • Evictions from residential rental property if the eviction order has already been signed.
  • Suspension of driver’s licenses.
  • Suspension of professional licenses.
  • Assessments of taxes or audits.

Also note that the automatic stay is designed to protect only the debtor who has filed for bankruptcy. If there is a situation where such a debtor is a co-defendant alongside someone else, only the debtor will be protected from the lawsuit by the automatic stay. There are exceptions to this rule. Specifically, if a co-defendant is so closely related to the debtor such that a proceeding against the former would affect the bankruptcy estate, say for instance if the co-defendant were a wholly owned subsidiary of the debtor, then the co-defendant may be covered by the automatic stay as well.

There are also limits on the effectiveness of the automatic stay that kick in if you’ve filed for bankruptcy before. If you filed a bankruptcy that was dismissed by the court in the 12 months prior to filing another bankruptcy, the automatic stay is good for only 30 days. If you had 2 or more bankruptcies dismissed in the twelve months prior to filing another bankruptcy, there is no automatic stay. A court could still grant you an automatic stay if you file a motion setting out why you need one, but you’ll have to fight harder for it than you would have were this your first bankruptcy.

When Will Relief From the Automatic Stay be Granted?

The automatic stay doesn’t last forever and will end when:

  • Your case is dismissed.
  • Your case is discharged.
  • You no longer choose to include or protect certain assets in your bankruptcy.

In certain circumstances, creditors can also request that the stay be lifted. For example, a creditor can request that the stay be lifted if the stay does not give them adequate protection in some property in which they have a significant interest. Determining whether their interest is significant enough depends on the property involved and the skill of the lawyers who are making arguments. If you decide to file for bankruptcy, it’s a good idea to retain a lawyer who can advise you on how best to make use of the automatic stay.

mm
Written By
AttorneyFee
AttorneyFee provides the most accurate, up-to-date legal services’ cost information in existence. By making legal costs more transparent for consumers we are helping middle class Americans get access to justice and manage their legal expenses.
workers comp fees

Paying a Workers’ Compensation Attorney – Fees by State

Whether you work from the comfort of an office, or outside as a law enforcement officer, or behind the counter as a cashier, all workers face the potential of on-the-job injuries. Between wage payments, benefits, and other costs under deductible provisions, United States businesses fork over an average of $62 billion annually due to workers’ […]

mm
AttorneyFee

Costs & Types of Fees when Paying a Probate Lawyer in your State

All have experienced the loss of a loved one. Whether it’s due to heart disease, cancer, a car accident, or the basic flu, the loss is often tragic, unexpected, and leaves a hole in the family’s heart. The funeral service is over. The true mourning is beginning. But wait, what are we supposed to do […]

mm
AttorneyFee
personal injury attorney fees

Typical Attorney Fees for Personal Injury

Personal injuries amass from a variety of situations. Statistics show that, annually, 68.7 million Americans visit either a doctor’s office or an emergency room for a form of personal injury. That amounts to a staggering 21% of the country’s population! Understandably, some injuries are simple accidents. Others may be caused by one or more forms […]

mm
AttorneyFee