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).