Filing for Bankruptcy: The Automatic Stay

Memphis Bankruptcy, Social Security Disability & Long Term Disability Attorney

Financial burdens can cause stress on you and your family. You shouldn’t have to worry about your home or car being taken from you while you work to pay off your debts. If you are considering bankruptcy you may be wondering what will happen to valuables like your home or car. The automatic stay may be one of the biggest benefits of filing for bankruptcy. 

The automatic stay in bankruptcy may not only let you keep your assets for the bankruptcy period but may also stop creditors from harassing you into making payments. It is important to learn about the automatic stay and its exceptions if you file for bankruptcy.

Don’t let creditors take advantage of you. Having an attorney on your side may not only help you with debt but may also secure your home or other valuables. John Dunlap is an experienced attorney who has worked with many bankruptcy cases. Contact us today for a free 30 minute session and learn how we may be able to help. 

What is an automatic stay?

An automatic stay is a legal constraint put in place after you file for bankruptcy that can temporarily stop creditors, collectors, or government agencies from collecting your money or your property. It is considered “automatic” because it begins as soon as the bankruptcy petition is filed and gives you time to reorganize your finances.

Bankruptcy may offer some relief if you fear that your home or car will be taken from you in a time of financial distress. If you are at risk of being evicted, foreclosed on, having your wages garnished, or having your vehicle repossessed, an automatic stay through bankruptcy may be a valuable option to consider. It may be able to stop: 

  • Evictions
  • Foreclosures 
  • Repossessions
  • Wage garnishments
  • Tax debt collections

Automatic Stay Chapter 13

There are many advantages to filing Chapter 13 bankruptcy and the automatic stay is one of them. When you file a Chapter 13 bankruptcy, you propose a repayment plan that will provide you time to pay back some of your debts owed. In some cases, you may be able to make lower payments for a longer period of time. One of the best advantages of Chapter 13 is it may allow you to stop foreclosure while making mortgage payments that fit your budget.

After you have filed for Chapter 13, the automatic stay immediately goes into effect and stops creditors from going through with foreclosure. You may be able to make delinquent payments on your home in your repayment plan too. This may help you make smaller payments on time while keeping your home.

Automatic Stay Chapter 7

Unlike Chapter 13, a Chapter 7 bankruptcy case is focused on a liquidation process to pay debts. In a Chapter 7, all of your nonexempt assets are liquidated and used to pay back your creditors and then cancel most or all of your debt balance. 

Once you file for Chapter 7 bankruptcy, the automatic stay is in effect when the bankruptcy is filed. Like Chapter 13, the automatic stay in Chapter 7 can stop some of all of your creditors from collecting debt or property. Bankruptcy can also allow you to maximize the value of your property if you have a large debt. If the debt is worth more than the property value, bankruptcy may allow you to get rid of all of your debts.

How long does the automatic stay last?

In most cases, once you file for bankruptcy, the automatic stay goes into effect and may last months or years depending on your bankruptcy period. Chapter 7 cases typically last a few months long and Chapter 13 cases may last 3 to 5 years. Often the automatic stay may remain in place during those time periods.

Although the automatic stay offers solutions for keeping your assets while you take care of your finances, there are times when the automatic stay may be limited. If you have had two bankruptcy filings in one year, the automatic stay limit may only last up to 30 days. If you have had more than two bankruptcy filings within a year, the automatic stay may not take effect at all.

Talking with an attorney about your bankruptcy case may provide you with the guidance you need to move forward. An attorney may also be able to file your paperwork and help you with your bankruptcy case, repayment plan, and automatic stay to help you avoid any pitfalls that you may come across. 

Bankruptcy automatic stay violation

Under an automatic stay, you may be protected from harassment from creditors. However, there may be times when creditors continue to contact you after the automatic stay is in place. This is known as an automatic stay violation. Once you file for bankruptcy, most pending and ongoing debt collection has to come to a stop, including phone calls and letters.

It is important to know that there are some steps you can take if creditors violate your automatic stay. First, you will want to check to make sure that your creditors are aware of your bankruptcy filing status. Often creditors may call or send letters accidentally if they aren’t aware of the initial filing. 

Your attorney may be able to help you correctly file bankruptcy paperwork so that creditors don’t continue to contact you during your bankruptcy period. If creditors proceed to purposely harass you, your attorney may be able to take further action from that point on. 

Can an automatic stay be lifted?

Although the automatic stay is put into place to stop creditors from further collecting debt while you are in the bankruptcy period, they may attempt to get the automatic stay lifted. If a creditor wants to continue to seek payment from a debtor during the bankruptcy, they may seek permission by filing a motion for relief from the automatic stay. However, the court can choose to deny the motion. 

It is also important to know that although many creditors are stopped from seeking collection after an automatic stay is in place, there are some collection attempts that are allowed even with an automatic stay, such as:

  • Child support 
  • Spousal support
  • Criminal fines
  • Tax audits
  • Student loans

Creditors may still be able to contact you or send you letters trying to collect debts that are unsecured or debts that are not part of the bankruptcy filing. An attorney may be able to help guide you on your bankruptcy filing and the automatic stay so that you can be on your way to financial freedom. 

Contact us to start an automatic stay and protect your assets

You don’t have to live in fear of losing your home or car. The automatic stay may stop creditors from collecting on your home or car while you reorganize your finances. John Dunlap is an experienced attorney who has worked with many individuals on their bankruptcy cases. Call today for a free 30 minute session to see how we can help.