As we continue to navigate the uncertainties of the coronavirus pandemic, financial hardship is inevitable for many. If you have been laid off from your job or your business is suffering, paying your usual monthly bills can become a burden. And unfortunately, creditors will eventually begin collection efforts.
Filing for Chapter 7 or Chapter 13 bankruptcy is a proactive solution to consider in order to pause aggressive collection efforts and give you time to financially recover. An automatic stay goes into effect the moment a debtor files for bankruptcy.
What is an automatic stay?
By definition, an automatic stay is a provision in the United States bankruptcy law that temporarily prevents creditors, collections agencies, government entities, and individuals from pursuing debtors for the amounts they owe. The automatic stay applies to both individuals and businesses and all chapters of bankruptcy code.
Because it provides immediate relief from collection activities, an automatic stay is one of the most appealing features of bankruptcy. It also puts all creditors on a level playing field by preventing one creditor from seizing a debtor’s assets before others have had the opportunity to do so.
What does an automatic stay prevent?
As soon as you file for bankruptcy, an automatic stay temporarily prevents a variety of collection activities against you, including:
- Utility disconnection
- Collection attempts on debts you incurred prior to filing
- Home foreclosure
- Most evictions
- Attempts to obtain property from or control your bankruptcy estate
- Vehicle repossession
- Collection of overpayment of public benefits
- Multiple wage garnishments
The injunction is binding in every court, jurisdiction, and proceeding and is especially beneficial if you are facing aggressive collection efforts. Ideally, this protection will allow you to rehabilitate your finances and reorganize your debts.
Are there exceptions to an automatic stay?
Unfortunately, yes. An automatic stay does not protect you from every legal or financial issue. Here are a few exceptions:
- Collection attempts on debts you incurred after filing
- Lawsuits initiated after filing
- Tax proceedings (audits, deficiency notices, and payment demands)
- Divorce proceedings
- Eviction, in some cases
- Criminal proceedings and investigations
- Support actions, including child support, alimony/spousal support, and paternity
Before filing for bankruptcy, it’s important to understand these exceptions so that you do not assume all legal or financial issues are halted by an automatic stay.
How long does an automatic stay last?
In most cases, an automatic stay lasts throughout the duration of your bankruptcy case. The length varies based on the type of bankruptcy filing, since Chapter 13 bankruptcy cases usually last significantly longer than Chapter 7 cases. Having multiple bankruptcy cases pending at one time will also impact the length of the automatic stay.
Because of the limitations and regulations involved in an automatic stay and bankruptcy cases, it’s important to consult an attorney about your specific financial situation.
Tolar & Tolar Attorneys at Law are here to help
Are you considering filing for bankruptcy to provide relief during these difficult financial times? The attorneys at Tolar & Tolar are here to help you navigate the process. Bankruptcy is not a do-it-yourself process, and a misstep can cause your entire case to be thrown out, impact the amount of debt that is dismissed, or cause you to lose certain assets to the court that you were wanting to save. At Tolar & Tolar Attorneys at Law, we believe you shouldn’t have to go at it alone, and we dedicate ourselves to making sure you get a fair shake and can keep as much of your life together as possible. Our goal is to give you a new and brighter economic outlook.
Let our family help your family! Contact us today to set up your free consultation! We are available by phone or teleconference.