Bankruptcy 101: The Automatic Stay
When you file for bankruptcy, the court imposes an automatic stay. This part of bankruptcy law protects consumers from collection attempts while they go through the bankruptcy process, and it applies to the vast majority of creditors. As soon as an individual files for bankruptcy, the automatic stay goes into effect. It prevents individual creditors and companies from continuing collection attempts against a debtor.
How the Automatic Stay Protects You
For those in substantial financial trouble prior to bankruptcy, the automatic stay can be a huge relief. Once a debtor is protected by the stay, creditors cannot start or continue court proceedings against them, create or enforce a lien against their property, or repossess collateral. If a creditor violates any part of the automatic stay, you may be able to file a lawsuit against them and seek damages.
The automatic stay assumes good faith on the part of the debtor. If a consumer is unable to pay their debt, it doesn’t make sense to have them continue to make payments while their bankruptcy goes through the court system. The automatic stay assumes that the bankruptcy will be successful and allows the debtor to begin using their money to cover other expenses.
Additionally, the automatic stay helps creditors. Without the automatic stay, creditors could find out that a debtor was filing bankruptcy and try to seize their assets before other creditors could make their claims. With the automatic stay, any assets that can be seized for debt payments are distributed fairly across all creditors.
How Long the Automatic Stay Lasts
The automatic stay begins as soon as you file bankruptcy. It continues until the bankruptcy is granted and the debts are discharged or until the case is dismissed. In the event that your bankruptcy case is dismissed, you must resume making payments.
Exceptions to the Automatic Stay
There are certain proceedings that are not stopped by an automatic stay. If your landlord has already secured a judgment of possession, they can continue the eviction process. Domestic support, including child support, is not stopped during the automatic stay. Criminal prosecutions are also not part of an automatic stay. For example, if you are convicted of fraud and are required to pay a fine, you must still pay the fine.
Additionally, creditors can request that the automatic stay be lifted. These requests are typically only granted in situations where the debtor is behind on payments on a secured debt, such as a car loan or mortgage.
Bankruptcy could be your opportunity to start over and change your financial future. Learn more about your options by contacting Lucid Law at 908-738-8245.