Attorneys: Join Our Network

Bankruptcy’s Secret Weapon: The Automatic Stay

In the world of bankruptcy, the automatic stay is like the magic wand that halts the activities of your creditors.

You can take full advantage of the automatic stay by speaking with a Total Lawyers' sponsoring bankruptcy attorney who can work with you to file your bankruptcy case.

All you have to do is give us a call at 1 (877) 349-1309 or complete our free bankruptcy evaluation form. Basically, when you file bankruptcy, the automatic stay will stop the collection efforts of your creditors (people whom you owe). When the automatic stay takes effect, creditors are not allowed to:

  • Send you collection letters;
  • Call you;
  • Sue you;
  • Repossess your car;
  • Foreclose on your home; or
  • Garnish a specific portion of your wages.

This even applies to orders issued prior to your bankruptcy filing.

When the bankruptcy court issues an automatic stay in your favor, you are shielded from certain kinds of activities which creditors may initiate in the normal course of business when seeking to collect a debt:

Utility shut-offs. If the utility company has shut off your lights and gas, bankruptcy's automatic stay will force them to reconnect you. The automatic stay can even stop threats of disconnecting you, and force the utility company to leave your power on.

Foreclosure. If you're facing foreclosure, the foreclosure proceedings will be halted by the automatic stay. Filing for Chapter 13 bankruptcy may be the best way to save your house from foreclosure. In most cases, filing for Chapter 13 bankruptcy at any time prior to the sale of your house will prevent foreclosure. But even filing for Chapter 7 bankruptcy can temporarily stop foreclosure action.

Lawsuits/Garnishments. Lawsuits and wage garnishments are instantly halted when you file for bankruptcy. Because of the automatic stay, your paycheck is safe from collectors and creditors.

Repossession. With the power of the automatic stay, your car will be safe from repossession. Creditors, too, are blocked from taking your vehicle by the automatic stay. Be aware, though, that this is only a short-term solution. In the long run, you'll have to reaffirm your loan or file Chapter 7 bankruptcy and return the car. Chapter 13 bankruptcy can only save your car if you make all the necessary payments. Otherwise, creditors can demand that the judge "lift the stay" in order to legally repossess your car.

SSI/Food Stamps/Public Benefit Overpayments. If a public assistance agency mistakenly overpays you, that agency can usually collect the excess amount. With the automatic stay in place, the agency cannot collect the overpayment. Unless the agency can prove that the overpayment was a result of fraud, your bankruptcy filing will eliminate that debt.

Tax Levies. While the automatic stay is in place, the IRS cannot seize your property or issue a tax levy as payment for a tax debt. The IRS can still audit you, as well as require you to file tax returns, assess you a tax liability and force you to pay the assessment.

Debts Not Subject to the Automatic Stay

There are certain debts that the automatic stay will not cover. These debts include:

Criminal Proceedings: Criminal action will not be affected by the automatic stay. If you're facing charges for driving under the influence, a bankruptcy petition will not prevent prosecution, fines or court costs. If you have been charged with a crime, you should contact a criminal defense attorney near you right away. If a criminal action involves separate debt and criminal liabilities, the automatic stay may prohibit the creditor from collecting the underlying debt.

Support Actions: The automatic stay will have no impact on lawsuits against you involving the establishment of paternity, or the establishment, modification or collection of child support or maintenance.

Length of Automatic Stay

The automatic stay remains effective until:

  • You finish your bankruptcy proceedings and are discharged;
  • The bankruptcy judge responds to a creditor's request to have the stay lifted; and
  • The protected property becomes separate from the bankruptcy estate.

In some limited circumstances, the automatic stay is not automatically activated when you file bankruptcy or requires your bankruptcy lawyer to file a motion to keep it in effect. Usually, these circumstances apply to some people who have recently filed one or more bankruptcy petitions.

Speak with a Bankruptcy Attorney

If you still have questions about filing a bankruptcy petition or about the automatic stay, we can connect you with a bankruptcy attorney in your area. Just give us a call at 1 (877) 349-1309 or complete our free bankruptcy evaluation form.