An automatic stay is an injunction triggered by certain bankruptcy filings. The different types of bankruptcy that put it in place are Chapters 7, 11, and 13. Once it is in effect, debtors are protected from being hounded by creditors and other collection agencies. This means that all debt collection activities must be halted once the automatic stay is in place. Creditors should no longer:
- Call you or send you correspondence with the purpose of collecting payment.
- File or maintain a collection lawsuit.
- Get the court to order your employer to garnish your wages.
- File a lien.
It’s understandable how the automatic stay is an important motivator for somebody to file for bankruptcy. With the protection it offers, a debtor can get some rest from persistent debt collection efforts as well as a chance to think more clearly so he or she can make plans for putting his or her financial affairs in order. The bankruptcy process also includes the all-important debt discharge that affords the filer a fresh start.
Effects of the Automatic Stay
Unpaid debt could lead to various unpleasant situations, including disconnection of services, foreclosure, repossession, and even job loss in case of a wage garnishment order. With disconnection of basic services, such as utilities, the automatic stay can prevent it for 20 days. The same is true for wage garnishment, as long as it’s not for high priority financial obligations like child support or alimony. It can also temporarily halt foreclosure or eviction. Take note, however, that, when it comes to evictions, the automatic stay doesn’t apply if:
- Your landlord has already secured a judgment of possession in your eviction case.
- Your landlord has filed claims against you of property endangerment or the use of controlled substances.
Automatic Stay against Foreclosure
The extent of the automatic stay’s influence on foreclosure depends on the bankruptcy chapter you filed under. Both Chapters 7 and 13 trigger an automatic stay, but Chapter 13’s is the better protection against foreclosure. This type of bankruptcy also provides more tools for you to be able to hold on to your home. A Chapter 7 automatic stay doesn’t have much power in stopping a foreclosure unless you get your creditor to officially agree on a debt repayment plan or another kind of debt settlement arrangement.
Unaffected by the Automatic Stay
There are bankruptcy cases wherein the automatic stay is lifted or does not apply. For instance, there are debts that are non-dischargeable. Find out which scenarios cause the automatic stay to be lifted or ineffectual if you’re filing for bankruptcy. Arizona bankruptcy lawyers can tell you in what ways the automatic stay may not be able to protect you, so it’s best to consult one before filing bankruptcy. Here are some examples.
- Despite an automatic stay, you’re still open to a collection lawsuit against you in relation to collecting, establishing, or modifying alimony or child support.
- The IRS may still audit you and demand a tax return, even if it can’t issue a tax lien or seize property because of the automatic stay.
- You’ll still have to go through criminal proceedings even with a debt-related case; the criminal part will simply be separated from the debt repayment part.
- You’re still required to repay loans from most job-related pensions. Failure to repay said loans may lead to a portion of your paycheck being withheld.
Removing the Automatic Stay
There are ways to have the automatic stay lifted in circumstances wherein the creditor can have it removed. The following are some instances:
- A landlord may go to the bankruptcy court and file a motion for the automatic stay to be lifted if the filer petitioned for bankruptcy just as he or she was about to be evicted for failure to pay rent, both the arrears and the current due.
- Secured creditors may also go to court to have the stay lifted when their debtors file for bankruptcy just as their collateral is about to be repossessed for their failure to make payments over a period of time.
Do You Want Bankruptcy Protection? Consult an Arizona Bankruptcy Attorney Today!
Bankruptcies offer different benefits. If you want to know what kind of protection a bankruptcy filing will get you, discuss this with an Arizona bankruptcy lawyer. When it comes to any serious financial problems, it’s best to approach a bankruptcy law attorney so you can be accordingly guided toward the best debt relief option for your situation. For legal advice on bankruptcy matters, call us at Phoenix Fresh Start Bankruptcy Attorneys and schedule a consultation with one of our experienced bankruptcy lawyers.