Bankruptcy Attorney in Phoenix, Arizona
If your debts have become unmanageable, filing for bankruptcy can be your last resort to solve debt problems. Bankruptcy provides protection for creditors through the automatic stay. It also allows you to pursue debt settlement, reorganize your finances, and pay off a creditor. This is an opportunity for a bankrupt person to obtain financial freedom and have a fresh start. A knowledgeable Phoenix bankruptcy attorney can explain how an automatic stay can help in your financial situation.
Filing for bankruptcy allows a debtor to take advantage of protection known as the automatic stay. The stay acts as an injunction that stops creditors’ attempts to collect debts or enforce liens during the bankruptcy case. Once you file for bankruptcy, your assets will be transferred to the bankruptcy estate, and an automatic stay will protect you from your creditors.
If you are considering filing for bankruptcy in Arizona, call us today at Phoenix Fresh Start Bankruptcy Attorneys, PLLC today. Our credible Phoenix bankruptcy attorneys will explain how a court-ordered automatic stay can help you in your bankruptcy case.
What is an Automatic Stay?
The automatic stay is a federal court order issued “automatically” by the United States Bankruptcy Court. From the moment you file your bankruptcy petition, this stay stops your creditor, collection agency, or government entity from taking any further collection activity against you. It strictly prohibits the continuation of foreclosure, repossession, garnishment, lawsuit, collection phone calls, sending of any bill or collection letter, or “payment reminder” through the mail.
An automatic stay is a powerful tool that can help you solve your financial troubles. If you’ve fallen behind on mortgage or credit card payments, if the utility companies have been threatening to turn off your service, or if you’re about to be evicted from your home, then the automatic stay can save you. If creditors or debt collectors continue to harass a debtor after a stay is in place, they may violate the Fair Debt Collection Practices Act.
What Can the Automatic Stay Do For You?
As soon as you file your bankruptcy petition, the stay will immediately take place, alerting creditors and collectors that debt collection actions against you must stop. A knowledgeable Phoenix bankruptcy lawyer can explain the various things that an automatic stay can do for you and your financial situation.
Stop Utility Disconnection
An automatic stay stops your utilities from being disconnected. If you’re behind on your utility bills, some companies might threaten to disconnect your electricity, gas, water, or telephone services. In this case, the automatic stay will prevent the disconnection for at least 20 days.
Although a utility bill rarely justifies a bankruptcy filing, it might make sense to file if you have other debts that you can discharge. Some utility companies will likely require you to pay a deposit to guarantee future payment.
Stop a Government Agency From Collecting the Overpayment of Public Benefits
If you were overpaid for any benefits (Medicare or unemployment benefits), an automatic stay prevents creditors from garnishing the overpayment. However, it does not stop the agency that gives the benefits from stopping payment to you.
If you receive public benefits before you file your bankruptcy petition, the stay will stop the agency from collecting any benefits that were overpaid to you. This will last until the stay is lifted. Typically, the agency would collect the overpayment from you either by billing or deducting from your future benefit checks. However, if you become ineligible for benefits, the automatic stay doesn’t prevent the agency from denying or terminating benefits for that reason.
One of the benefits of the automatic stay is to delay or stop an eviction proceeding. If you’re being evicted from your home, the stay can temporarily help you stall the eviction. However, if your landlord already has a judgment of possession against you when you file for bankruptcy, the stay won’t affect these eviction proceedings.
In most cases, the automatic stay can give you a few days or weeks, but the landlord will probably ask the court to lift the stay and allow the eviction. The laws governing the automatic stay might be subject to change over time. Therefore, consulting a qualified Phoenix, AZ bankruptcy attorney is essential to ensure that your automatic stay and bankruptcy process would go smoothly.
Stop Foreclosure Proceedings
If you’re facing a home foreclosure, the automatic stay in bankruptcy will stop these proceedings. However, even though the foreclosure process is temporarily stopped, the bank will find ways to continue the foreclosure proceedings as soon as the stay is lifted.
The automatic stay gives you more time to try to deal with a pending foreclosure. The options for dealing with the proceedings depend on whether you file for bankruptcy under Chapter 7 or 13.
In Chapter 13 bankruptcy, the automatic stay can give you more time to catch up on any mortgage arrears and keep your home. You can repay debts or delinquent payments on a home mortgage through a repayment plan lasting three to five years.
In contrast, Chapter 7 can’t help you catch up on payments and keep your home. If you want to save your home, this bankruptcy chapter will not work for you. The relief provided by the automatic stay will only be temporary.
Stop Multiple Wage Garnishments
A wage garnishment is a tool whereby a certain amount of your monthly income is taken from your paycheck to pay your creditor. Wage garnishment intends to pay off the entire debt. An automatic stay can protect you from having your wages garnished. If the debt that prompted your wage garnishment is wiped out in bankruptcy, filing for bankruptcy could permanently stop the garnishment.
Be aware that commonly garnished debts (child support and alimony) won’t get discharged. What will happen to overdue support payments and back taxes will depend on the bankruptcy chapter that you file.
At Phoenix Fresh Start Bankruptcy Attorneys, PLLC, our seasoned bankruptcy lawyers in Phoenix will evaluate your financial situation and recommend how to stop wage garnishment through an automatic stay.
What Can’t the Automatic Stay Do For You?
An automatic stay comes with many benefits. However, there are limits to what the it can do. A qualified bankruptcy lawyer in Phoenix, AZ, can help you determine the situations where the stay will not help you. These include:
Stop Criminal Proceedings
If you are involved in a criminal proceeding that consists of both debt and criminal charges, the automatic stay will only stop the debt charges of the proceeding. It won’t stop a criminal proceeding.
For instance, you were convicted of a particular crime, sentenced to community service, and ordered to pay a fine. In this case, the community service punishment won’t be stopped by your filing for bankruptcy—and if the fine were also assessed as a punishment, you’d be required to pay it.
Stop Child Support and Alimony
The automatic stay won’t stop child support from accruing or delay family law proceedings. Child support debt is among the first debts to get paid. Also, the stay will not stop a lawsuit against an attempt to establish paternity.
In addition, not all legal actions are subject to the automatic stay. Bankruptcy filing and the automatic stay will not stop a lawsuit that tries to establish, modify, or collect child support payments and alimony. It will not stop criminal actions or traffic violation proceedings.
Stop Some Tax Proceedings
The automatic stay will not help you in the following circumstances:
- If the IRS demands payment for taxes that are owed
- If the IRS requires that you file a tax return or issues a tax assessment
- If the IRS wants to audit you or issue a tax deficiency against you
The IRS can still audit you; however, the automatic stay temporarily stops the IRS from issuing a tax lien or seizing your property or income. Whether you’ll be responsible for the tax after your bankruptcy case depends on whether the tax will be discharged in a Chapter 7 bankruptcy or whether you’ll pay the debt under Chapter 13 bankruptcy.
What Happens After the Automatic Stay Is Lifted?
Generally, an automatic stay will last until the bankruptcy proceeding is finalized and the bankruptcy judge discharges your debt. However, suppose the creditors obtained a court order lifting the stay. In that case, they can go ahead with the foreclosure of the property that secures the debt.
The length of an automatic stay may vary depending on the type of bankruptcy. For Chapter 7, a visit usually lasts between 3-5 months from when the court case was opened. For Chapter 13, bankruptcy cases could take anywhere from 3-5 years. Furthermore, multiple filings can also affect the length of an automatic stay. More than one bankruptcy filing in a calendar year could limit the stay to 30 days.
Speak to a Phoenix Bankruptcy Attorney
Filing for bankruptcy entails hard work and effort. It is a progressive process that will help you solve your financial problems one step at a time. When you declare bankruptcy, an automatic stay will take effect and can protect you from debt collectors. The automatic stay is a crucial part of the bankruptcy process that can grant you peace of mind.
If you need help with a bankruptcy filing or would like to know more about the automatic stay process, it is highly advisable to consult our competent Phoenix, AZ bankruptcy lawyers at Phoenix Fresh Start Bankruptcy Attorneys, PLLC.
Our bankruptcy law firm will provide legal advice on whether filing for bankruptcy is the right path for you. An assessment of your case can reveal which bankruptcy options may be best for you and how you can move forward with the appropriate course of action.
Schedule a consultation with our Phoenix bankruptcy law firm today!