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.