What is an automatic stay? It is an injunction that takes effect when you file any of these types of bankruptcy: Chapter 7, Chapter 11, or Chapter 13. Debtors can count on it to protect them from being hounded by creditors and collection agencies. If you filed for bankruptcy, this means that your creditors must stop their collection efforts. It means that they may no longer call you or send you correspondence with the purpose of collecting from you, file or maintain a collection lawsuit, petition for wage garnishment, or file a lien.
Any debtor would be motivated by the promise of an automatic stay to file for bankruptcy. It brings forth relief from the relentless pressure from debt collectors to pay up, as well as a chance to take stock of his or her financial situation and come up with fitting solutions. There is also the debt discharge of the bankruptcy process, which provides the opportunity to start afresh.
The Automatic Stay Advantage
A debtor may face various unpleasant situations such as foreclosure, basic services disconnection, and employment loss on account of wage garnishment. The automatic stay can help by preventing disconnection of these basic services, such as utilities, for 20 days. It can also prevent wage garnishment unless the debt in question is high priority, such as child support and alimony. It can temporarily stop foreclosure or eviction, but not in cases where the landlord already has a judgment of possession or has filed claims against the tenant of endangering the property or using controlled substances.
When it comes to foreclosure, it might be better to file under Bankruptcy Chapter 13. It offers better protection than Chapter 7, providing tools that allow the filer to keep his or her home. Even with an automatic stay, Chapter 7 bankruptcies cannot prevent a creditor from pursuing foreclosure if the debtor doesn’t propose a satisfactory debt repayment plan or if the two parties do not come to a formal agreement on the matter.
What Proceedings Aren’t Affected by the Automatic Stay?
If you’re filing for bankruptcy, don’t assume that the automatic stay offers you blanket protection from all financial obligations. There are debts that are non-dischargeable, and there are situations that remain unaffected by the stay. Take note of the following examples:
- You still have to repay loans from most job-related pensions. Failure to do so won’t prevent a portion of your paycheck from being withheld.
- You still have to go through debt-related criminal proceedings, but your case may be divided into the debt repayment part and the criminal part.
- You may still have to give a tax return and be audited by the IRS, although the stay can prevent property seizure or a tax lien.
- You still have to face any lawsuit against you that is related to collecting, modifying, or establishing child support or alimony.
Having the Automatic Stay Lifted
It’s possible for a creditor to go to court and file a motion to have the automatic stay lifted. For instance, when a tenant, who is just about to be evicted for failing to pay arrears and rent due, files for bankruptcy, the landlord may go to the bankruptcy court and request for the stay to be removed. Similarly, a secured creditor may ask for a stay to be lifted if the debtor files bankruptcy just before having his or her collateral repossessed for failing to pay off the loan over a considerable period of time.
Interested in Bankruptcy Protection? Call an Arizona Bankruptcy Attorney Today!
If you’re wondering how a bankruptcy filing can protect you, consult a bankruptcy lawyer to get the correct information and legal advice. Bankruptcies have different circumstances, so it’s best to get guidance that specifically caters to your case. For legal aid on debt relief solutions, call us at Zolman Law and speak with one of our experienced Arizona bankruptcy attorneys.