Understanding The Automatic Stay In Bankruptcy

On Behalf of Steele Law Firm PLLC | Jul 12, 2019 | Uncategorized

Perhaps you’ve traveled a long road to find the right debt relief option to help you with your financial struggles. If you are like most Fort Worth residents, you tried other options before reaching the conclusion that bankruptcy would provide you with the best outcome.

Perhaps you heard that an automatic stay goes into effect once you file your petition. You need to know what this does and does not do for you as your case progresses.

What does the automatic stay do for you?

The automatic stay provides you relief from the following:

  • If a creditor garnishes your wages, that stops during the bankruptcy proceedings. Even the IRS must stop wage garnishments while the case is open.
  • The benefit most people look forward to when filing is no longer receiving harassing phone calls and other communications from creditors and debt collectors.
  • Utility companies cannot cut off your service during the proceedings. However, the court will probably allow them to demand some sort of deposit.
  • Your landlord cannot evict you as long as he or she has not yet obtained a judgment from the court. However, the automatic stay only buys you time unless you catch up on your rental payments, and you need to remain current on your rent.
  • Your mortgage loan lender cannot foreclose on your home. However, if you fail to get current on your payments, the lender can petition the court for the right to continue foreclosure proceedings.

The goal of the automatic stay is to give you time to work out your financial issues and get back on track with a fresh start, but it’s not foolproof.

What does the automatic stay not do for you?

The automatic stay does have the following limitations:

  • Any child support obligations you have are not subject to the automatic stay.
  • Criminal proceedings do not stop because you file for bankruptcy.
  • An eviction may move forward if your landlord received an judgment against you prior to your filing.
  • If you took out loans against your retirement account, you must still pay those back even though you filed bankruptcy and may incur tax liabilities as well.
  • If you file bankruptcy twice in the same year, the automatic stay only lasts 30 days.
  • If you file three or more bankruptcies within a year, the automatic stay does not apply at all.

You should know that a creditor can file a motion with the court to lift the automatic stay in order to proceed with legal or collection actions against you. These requests are considered on a case-by-case basis and most often apply to secured debts such as mortgage or vehicle loans.

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