The Automatic Stay in Bankruptcy: What is it? What Does it Do?

The Automatic Stay in Bankruptcy: What is it? What Does it Do?

The Automatic Stay is the part of a bankruptcy case that protects you from creditors after you file your bankruptcy case. It stops creditors from taking legal action against you regarding debts you may owe.

The Automatic Stay Prohibits Creditors From Taking the Following Actions:

  • Debt collection lawsuits
  • contacting you
  • collections
  • liens on your property
  • sheriff sale of your home
  • vehicle repossessions
  • wage and bank account garnishments
  • most evictions
  • utility disconnections.

When Does the Automatic Stay Begin?

Filing your Bankruptcy Petition with the Bankruptcy Court triggers the automatic stay. After your bankruptcy case is filed with the Bankruptcy Court, within a day or two, the bankruptcy court will mail a written notice, called the “automatic stay,” to all the creditors you owe that are listed on Schedule F of your Bankruptcy Petition and Creditor Matrix. This written notice of automatic stay is a Court Order that prohibits your creditors from taking several different types of legal actions against you.

What Does the Automatic Stay Do?

After you file Bankruptcy, it stops creditors from filing lawsuits against you. Lawsuits that are already filed in court against you are stopped. Lawsuits that have already ended with a judgment against you are rendered unenforceable.

The automatic stay prohibits creditors from contacting you. It stops creditor phone calls, collection letters mailed to you, and creditor emails and text messages. If creditors seek to contact you, they may only contact you through your bankruptcy attorney.

Creditors that have obtained a court judgment against you, before your bankruptcy case was filed, are stopped from taking any action to collect on the debt. The judgment is rendered unenforceable.

Before you file bankruptcy, your house is vulnerable to creditors that seek to place a judgment lien on your real estate. Once placed, the judgment lien acts like another mortgage on your house that you must pay or else you may lose your house. The automatic stay stops creditors from putting judgment liens on your property.

If a mortgage lender has foreclosed on your house, and your house is set to be sold at a sheriff sale, it stops this sale from happening. Provided that your bankruptcy case is filed before the sale takes place.

If you are behind on your car payments, your vehicle is vulnerable to being repossessed. It prohibits lenders from repossessing your vehicle. Upon filing your bankruptcy case, several options become available to get you caught up on payments if you wish to keep the vehicle. In the alternative, you can let the vehicle go and get rid of the car loan through the bankruptcy.

Once a creditor obtains a court judgment against you for the debt, that creditor may begin collecting that debt by garnishing your wages and bank accounts. A wage garnishment, once applied to your paycheck, will automatically take a portion of your paychecks until the debt is paid. A bank account garnish will automatically remove funds from your bank accounts to pay off the debt. After filing bankruptcy, creditors are prohibited from starting garnishments, and all current garnishments must stop  at the time the bankruptcy is filed.

The automatic stay stops your landlord from evicting you from your home. It only protects you from eviction if a judgment against you was after bankruptcy was filed, and if your landlord did not make a claim that you have endangered the property and/or used a controlled substance within the premises.

It also prevents utilities from disconnecting your services. This includes your gas, electric, water, sewer, and telephone.

Some Actions are Not Stopped by The Automatic Stay:

  • Attempts to collect on debts incurred after filing your bankruptcy
  • Lawsuits filed against you after you filed bankruptcy
  • Government tax collections and investigations such as audits, deficiency notices, and demands for payment
  • Divorce, child custody, and visitation cases
  • Child support and alimony payments
  • Criminal Proceedings & Investigations
  • Interception of your tax refund to pay past due child support

What Happens When a Creditor Violates the Automatic Stay?

Creditors who violate the automatic stay is the same as violating a court order. Creditors who violate the automatic stay may be subject to contempt of court, sanctions, and damages.

Contact Starks Law debt defense Attorneys to learn more about Chapter 7 bankruptcy relief

If you need debt relief or have questions about Chapter 7 bankruptcy relief, contact us at Starks Law P.C. for a free consultation with an attorney. We listen to the needs and goals of every client and create a legal strategy tailored to that person and their case. We do not believe in the 'one size fits all' legal strategy employed by other firms. Every case is unique, and we plan accordingly.

Representation from Starks Law begins with a simple phone call. We will review the circumstances surrounding your unique situation. After assessing the details, we will form an action plan tailored specifically for your case and goals. Additionally, we will do our best to answer any questions you may have so that you can make a fully informed decision on how to proceed. Take advantage of our Creditor Lawsuit Defense services.