What is the Bankruptcy Automatic Stay?
The automatic stay is one of the biggest benefit of filing for bankruptcy. The automatic stay immediately stops most civil lawsuits filed against you, such as creditors garnishing your wages, creditors seizing your bank account, if you are a defendant in a lawsuit or a sale date has been set in a foreclosure action on your home. The automatic stay applies to all Chapter 7, Chapter 11 and Chapter 13 and is what you need to immediately stop these collection efforts.
Unfortunately, for all the benefits you can receive from the automatic stay, there are a few things the automatic stay cannot do. It is important to understand how the automatic stay functions and to know what to expect before filing bankruptcy so your expectations are reasonable.
What will the Automatic Stay Does for You?
First, let’s look at how the stay works and what it does. Pursuant to 11 U.S. Code § 362, the automatic stay operates in the following instances:
- enforcing a judgment before a bankruptcy;
- commencing or continuing a judicial, administrative or other proceeding against the debtor or recovering a claim against the debtor;
- setoff of any debt owing to the debtor;
- obtaining possession of any estate property or creating or enforcing a lien against that property;
- collecting, assessing or recovering a claim against the debtor; and
- commencing or continuing a proceeding regarding tax liability.
An automatic stay is an injunction that stops your creditors from collection against you once you have filed for bankruptcy. This injunction goes into effect the moment you file your bankruptcy case and can only be lifted by the court after a creditor has filed a motion and has shown it has the authority to continue its collections efforts despite bankruptcy being filed.
This means the automatic stay will bring an end to dealing with daily calls from creditors and constant requests for payment. The automatic stay will halt all creditor harassment. The automatic stay will also stop foreclosure efforts on your home.
What the Automatic Stay Will Not Do.
Unfortunately there are a few things that the automatic stay will stop. For example, the automatic stay will not stop family law issues. If you are attempting to modify child support or alimony arrangements or you are dealing with another family law matter, the automatic stay will have no effect. Even collection efforts related to non-payment of court-ordered child support or alimony will continue despite you filing bankruptcy and the injunction created by the automatic stay.
The automatic stay also does not impede any law enforcement action against you. If a criminal prosecution is in progress or you are under investigation when you decide to file for bankruptcy, the benefit of the automatic stay will not affect those matters.
Additionally, some actions related to taxes may not be stopped by the automatic stay. State and federal government officials cannot record liens or levy assets for collection once you have filed for bankruptcy, but they can demand you file your tax return(s), audit any tax returns you have already filed, and assess taxes you might owe.
The automatic stay will not stop court-ordered sanctions for misconduct in litigation(s). If there is a civil contempt sanction against you, the automatic stay does nothing to stop the sanction.
How the Automatic Stay Helps You
There are a few specific things the automatic stay will not do, but overall you are going to experience a great deal of breathing room once it goes into action affording you time to recognize your financial life.
It is important to remember that every case is different, so speak to a Miami Bankruptcy Attorney about your situation and find out what the automatic stay will and will not do for you.
Contact a Miami Bankruptcy Lawyer
To learn more or to determine how the automatic stay will affect your case, contact Miceli Law, P.A. at 305-515-5928 to discuss your situation.