What Is An Automatic Stay? How Can It Protect You From Creditors?

If you are considering Chapter 7 bankruptcy or Chapter 13 bankruptcy, the automatic stay may be a compelling reason to file. But what is an automatic stay? And how can it protect you if you are in bankruptcy proceedings? Contact The Law Office of Diane Anderson today to learn more.

What Is An Automatic Stay?

Upon filing bankruptcy, the court will issue an order that will immediately stop most legal actions being taken against you and your property. This is called an automatic stay.

An automatic stay may be issued to address an array of legal actions that are being taken against you, including anything undertaken by creditors, collection agencies, and the government. Anyone you owe money to may be put on hold while your bankruptcy runs its course.

The automatic stay can stop the following:

• Credit card companies
• Car lenders
• Mortgage lenders
• Collection agencies
• Medical bill collectors
• Government entities
• Utility companies
• Landlords

What Can An Automatic Stay Prevent?

An automatic stay will affect the following situations:

Disconnections of Utilities

If a utility company is threatening to disconnect your water, gas, electric, or telephone, then an automatic stay can temporarily put a hold on the disconnection for 20 days. This will give you time to rectify the situation or make a payment plan with the utility company.

Home Foreclosure

A home mortgage company that has filed foreclosure documents will be stopped by an automatic stay. If you file a Chapter 7 bankruptcy, you may be able to renegotiate payments or relinquish your house. If you file Chapter 13, your past due payments will be included in your three to five year payment plan.

Eviction Process

If you are renting your home and your landlord has started the eviction process, then it should also be temporarily stopped by the automatic stay. However, if your landlord already has a judgment against you, then they may be able to carry through with the eviction. Your landlord may also be able to ask the court to lift the automatic stay for the purposes of eviction.

Collection of Overpayment of Public Benefits

If you received public benefits when you did not qualify or you received too much in public benefits, then the government may request for repayment of the amount you erroneously collected. Although an automatic stay can stop collection of the overpayment, it cannot prevent the government from stopping your benefits in the future.

Wage Garnishment

The automatic stay stops most wage garnishments. You file Chapter 7, much of the related debt will be discharged. If you file Chapter 13, you may roll the outstanding debt into your three to five year payment plan. You may not be able to discharge child support and alimony, but you can include them in your payment plan.

What Can An Automatic Stay Not Prevent?

There are certain situations where an automatic stay cannot help you. Those include:

Tax Proceedings

The IRS can still take action against you through audits, assessments, demands, and more. Although the automatic stay can stop a tax lien or prevent seizure of your property or income. However, you will still be responsible for the tax debt afterwards. If you file a Chapter 7, you may be able to make payment arrangements with the IRS. Very little tax debt gets discharged; however, it is possible. If you file Chapter 13, your tax debt may be included in your payment plan.

Child Support and Alimony

Although an automatic stay will stop most legal actions against you, it will not stop certain actions. Paternity suits and lawsuits to establish or modify child support and alimony will not be stopped by an automatic stay.

Criminal Cases

An automatic stay will not stop any criminal cases against you. Similarly, you cannot use bankruptcy to discharge criminal fines.

Pension Loans

If you took a loan from your pension, then that amount can still be withheld from your income regardless of an automatic stay.

Multiple Bankruptcy Filings

If you have filed for bankruptcy multiple times in the past, then your automatic stay may be limited or eliminated completely.

Contact Us To Learn More About The Automatic Stay

Our experienced bankruptcy attorneys have years of experience helping clients navigate bankruptcy. Contact The Law Office of Diane Anderson today to learn about your options, and how the automatic stay can help you.