Exceptions to the Automatic Stay

Exceptions to the Automatic Stay under the Bankruptcy Laws

When you file for protection under Chapter 7 or Chapter 13, the automatic stay under the Bankruptcy Code immediately goes into effect, prohibiting your creditors from calling, writing or taking other legal action to collect a debt from you. There are, however, specific types of legal actions that will not be affected by the stay.

Exceptions to the Automatic Stay under the Bankruptcy LawsTax Actions

The Internal Revenue Service, as well as state tax authorities, can still take certain actions, such as demanding payment of an assessment, requiring a tax return, conducting a tax audit or issuing a deficiency notice.

Family Law Obligations

Generally, child support and spousal support/alimony arrearages are not affected by a bankruptcy filing, and state enforcement agencies are not prohibited from collection efforts. Accordingly, if you have a child support or spousal maintenance deficiency, the collecting agency may engage in a wide range of actions in an effort to collect the amount past due, including:

  • Withhold money through your employer to pay current and past due child support
  • Attach any refunds from state or federal revenue agencies
  • Report your overdue support obligations to a credit reporting agency

The filing of a bankruptcy petition will have no impact on your obligation to pay ongoing support, or on custody or visitation determinations. The court may also modify your support order.

Pension Loans

If you borrowed money from a 401(k) or other company retirement plan, the imposition of the automatic stay won’t prohibit your employer from deducting an amount from your paycheck to repay the loan.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

The Automatic Stay in Bankruptcy

The Benefit of the Automatic Stay in Bankruptcy

The federal bankruptcy laws were enacted to give individuals and business owners a way to get a fresh financial start. But Congress also recognized the need to provide relief from aggressive collection efforts. That relief comes in the form of the automatic stay.

When you file a bankruptcy petition, whether in Chapter 7 or Chapter 13, the automatic stay automatically goes into effect. The automatic stay prohibits your creditors or their representatives from calling, writing or taking any action outside of the bankruptcy proceeding to try to collect a debt from you. The automatic stay applies to creditors and their legal counsel, collections agencies, and most governmental entities. Some specific provisions of the automatic stay include:

  • Foreclosure proceedings—An automatic stay will suspend (but not terminate) foreclosure proceedings
  • Evictions—The automatic stay can stall the eviction process for a few days, unless your landlord has already obtained a judgment of possession or can show that you are endangering the property
  • Utilities—Typically, an automatic stay will suspend the disconnection of services for up to 20 days
  • Wage garnishments—The automatic stay stops any garnishment proceeding

Exceptions to the Automatic Stay

You cannot use the automatic stay to stop or suspend:

  • Criminal proceedings
  • Child or spousal support actions
  • Some tax actions
  • The withdrawal of funds from your paycheck to repay a pension or retirement plan loan

The bankruptcy court has the authority to lift or remove the automatic stay, if a creditor can show that the stay serves no purpose. If you have real property with no equity, and have no way to make payments on the property, the bankruptcy court may lift the stay so that your lender can foreclose and protect its interests.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Should You File For Bankruptcy?

One of the crucial reasons that individuals file for bankruptcy is to receive relief from their creditors. The initial relief arrives in the form of an automatic stay. The automatic stay goes into effect immediately upon filing for bankruptcy. In general, the stay prohibits collectors from continuing collection activities unless and until the Court gives them permission to continue.

Bankruptcy advertisements often claim to:

The automatic stay, applied when applicable, ceases all of these actions.

Chapter 7 Bankruptcy

Chapter 7 is a “liquidation” bankruptcy. If an individual receives a discharge in their bankruptcy, the Debtor’s personal liability to pay for most of their debt is removed. Therefore, a chapter 7 can bring relief from creditors and resolve the debt issues. However, there are many exceptions, so it is vital to seek an experienced attorney.

Valid reasons to file under chapter 7 include:

  • Relief from the collection process when left with no other alternatives
  • In order to deal with the debt that has become unmanageable (outside the assistance of bankruptcy)

Whether you have reached the threshold in the above areas is the determining factor for whether or not to file.

Is Bankruptcy Right for You?

Learn whether bankruptcy is the right choice for you. Talk your debt-relief options over with an experienced attorney at the southern New Jersey law firm of John Hargrave and Associates. We offer free confidential consultations. Call 856-547-6500, or contact us online.

Stop Garnishment and Levies by Filing for Bankruptcy Protection

When your debts become unmanageable, you face the risk that creditors will take legal action against you, garnishing your wages or levying on your bank account. If you are already subject to a garnishment or you fear that a creditor may seek to attach your bank account, you can stop this action and protect your interests through a bankruptcy filing. Whether you file for protection under Chapter 7 or Chapter 13, an automatic stay immediately goes into effect when you file, preventing creditors from calling, writing or taking legal action against you.

The automatic stay will be in effect throughout the bankruptcy process. In a Chapter 7 proceeding, your debts will be permanently discharged, and your creditor will have no further right to seek recovery from you, once the bankruptcy is final. In a Chapter 13 reorganization, your creditor may not contact you or take any legal action against you (outside of the bankruptcy proceeding) during the term of your repayment plan (typically three to five years). At the end of your Chapter 13 reorganization your debts will be permanently discharged.

Ending Wage Garnishment with a Bankruptcy Filing

Before a creditor can file a request to garnish some of your wages, the creditor must file a lawsuit against you and get a judgment. Before the lawsuit can proceed, you must receive notice that you have been named as a defendant in a lawsuit. If you do not respond to the lawsuit, the creditor can obtain a default judgment. Even if a creditor files for garnishment of your wages, your employer typically cannot withhold more than 10 percent of your paycheck (there are exceptions, though, for child support and tax arrearages). The automatic stay in a bankruptcy stops wage garnishments.

Stopping a Bank Levy

When a creditor attempts to levy a bank account, they obtain a court order directing your bank to freeze some or all of the assets in your bank account. The automatic stay in bankruptcy prohibits your creditor from taking this legal action against you.

Contact John Hargrave & Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Exceptions to the Automatic Stay Afforded by the Bankruptcy Laws

When you file a petition in bankruptcy, you are immediately entitled to certain protections provided by the automatic stay established by federal law. This prohibits creditors from calling, writing or taking any legal action outside of the bankruptcy court to collect the debt. There are, however, certain obligations that are exempt from the automatic stay. These include:

  • Certain family law/divorce payments or arrearages—All payments of child support or spousal support ordered by a court are typically unaffected by the automatic stay. This includes any efforts by a court or state administrator to collect payments due for alimony or child support.
  • Repayment of a pension loan—If you borrowed funds from an ERISA-qualified pension plan, including a 401k or an IRA, the automatic stay does not prevent withholding from your income to repay that loan.
  • Debts related to real property—Because the automatic stay suspends legal proceedings, it will typically prohibit any attempt to evict you from rental property. However, if your landlord obtained a judgment of possession of the premises before you filed for bankruptcy protection, you will not be able to forestall the eviction through your bankruptcy filing. If, however, you can show that the eviction stemmed from your failure to pay rent, you may be able to successfully reinstate the automatic stay. An automatic stay will also not be valid in an eviction proceeding where your landlord can show that you are engaged in the illegal sale, manufacture or use of controlled substances, or that you are taking actions that will lead to the destruction of the property.

Losing the Protection of the Automatic Stay

There are also a couple ways to lose the automatic stay, once it is in place. If you fail to meet deadlines set by the bankruptcy laws, you can have the automatic stay revoked. In addition, if you filed one other bankruptcy proceeding within a year prior to the current petition, the automatic stay only goes into place for 30 days (although it may be extended by asking the court to extend it). If you have filed two other bankruptcy proceedings in the year prior to the current petition, the automatic stay does not go into effect unless the court orders that you be protected by the automatic stay.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-759-6022 (toll free at 866-662-3191).

Can You Prevent the Loss of Your Home or Car by Filing for Bankruptcy Protection?

If you have fallen behind on your mortgage or car payments because of the loss of your job, medical expenses, a divorce, or for any other reason, you may live in daily fear that you will lose your home or your vehicle. You may have considered filing for bankruptcy, but heard conflicting stories about whether or not you can protect real property or a car through a bankruptcy petition. Here’s what you need to know.

The Automatic Stay Provided by the Bankruptcy Laws

When you file for bankruptcy, an automatic stay immediately goes into effect, suspending all legal action related to any debt that is part of the bankruptcy. This means that your creditors cannot call or write you in an effort to collect on a debt. It also means that they cannot initiate or continue any legal action (outside of the bankruptcy proceeding) and that all legal efforts to collect from you, or to foreclose on or repossess your property must immediately stop. In order to take advantage of the automatic stay, however, you must file for bankruptcy protection before the foreclosure sale, or before your vehicle has been repossessed. It may be possible, with respect to a car, to get the vehicle back if you file for bankruptcy after it has been repossessed, but before it has been sold at an auction.

Discharge vs. Reorganization of Your Debts

Some creditors, such as credit card creditors and medical creditors, are unsecured creditors. This means that there is no specific piece of property that their debts are attached to. On the other hand, some creditors are secured creditors. The most common secured creditors are automobile lenders, who hold a lien on the car, and mortgage companies, who hold a mortgage on a home. Both Chapter 7 and Chapter 13 bankruptcy let you discharge most of your debts. However, if you want to keep the property which is subject to a secured creditor’s lien or mortgage, you need to keep paying that secured creditor.

A Chapter 13 bankruptcy provides a unique opportunity to have your unsecured debts discharged and to restructure your secured debts. While it is typically not feasible to change the terms of mortgage loans in a Chapter 13 bankruptcy without the cooperation of the lender, it is often times possible to change the terms of car loans. For example, in a Chapter 13 bankruptcy many individuals are able to reduce the total amount they need to pay to their auto lender by lowering the effective principal balance owed and interest rate to be paid to the auto lender. In addition, these payments can be stretched out over 5 years, so if you have a car payment that is too high, but only two years left on payments, then you can lower your monthly payment so that it is instead paid out over 5 years.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-759-6022 (toll free at 866-662-3191).