Automatic Stay acts as an Injunction
Typically, when a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy is filed with the bankruptcy court, an automatic stay goes into effect. The Automatic Stay acts as an injunction that, with certain exceptions, prevents creditors for contacting a debtor who has declared bankruptcy in an attempt to collect a debt.
What does the Automatic Stay do for Debtors?
Automatic stay provisions work to protect the debtor against certain actions from the creditor, including, but not limited to:
commencing or continuing judicial proceedings (filing a collection action with a court) against the debtor (generally prohibits most creditors from commencing or continuing with collection activities);
taking actions to obtain debtor's property;
taking actions to create, perfect or enforce a lien (interest granted over an debtor’s property to secure the payment of a debt) on debtor's property;
stopping pending eviction actions;
suspending (temporarily stopping) a foreclosure action;
preventing utilities from being disconnected for at least 20 days; and
stop wage garnishments and have certain garnished monies reinstated to the debtor.
When does the Stay take effect?
Under section 362 of the United States Bankruptcy Code, the stay begins at the moment the bankruptcy Petition is filed.However, secured creditors (those whose debts are secured by assets of the debtor) can petition the bankruptcy court for relief from the automatic stay so that the debts may be collected.
Are there things that the Automatic Stay does not cover?
The short answer is yes. Creditors with secured debts may ask for relief from the Automatic Stay. Also, Congress has provided that debtors who have creditors with a security interest in real estate can be required to continue making monthly payments to the secured creditor.
The Automatic Stay also does not prevent a landlord from filing to evict a tenant after the automatic stay goes into effect when the basis of the eviction is for use of illegal substances or "endangerment of the property”. And landlords who received a court order granting the eviction prior to the filing of the bankruptcy proceeding may continue to enforce the order of evidence even after the Automatic Stay goes into effect.
The length of the Automatic Stay may also be limited, or the Debtor may be required to file a request for an automatic stay to be put into effect if the debtor has filed other bankruptcy proceedings within the previous year prior.
What if a creditor tries to collect a debt during the bankruptcy proceeding?
If a creditor continues to try to collect a debt after the filing of a bankruptcy proceeding, the creditor may be violating bankruptcy’s automatic stay.
If you need help filing for bankruptcy, contact the bankruptcy lawyers at Stephanie Flynn Law, or call (402) 325-8469 to schedule an appointment.