Published:
Dec 1st, 2009
The Benefit of the Automatic Stay
A bankruptcy filing brings all of the debtor’s assets and debts under the protection and management of the bankruptcy court. While the court evaluates the bankruptcy estate and determines the dischargeability of debts, before the debtor gets a discharge, the code offers a debtor peace of mind that creditors will stop all collection actions.
Specifically, certain creditors are prohibited from the following actions: all attempts to collect a debt through telephone calls and other correspondence; repossessions; foreclosure sales of real property; garnishments and liens, and beginning or continuing law suits.
In a chapter 13 bankruptcy case, the Automatic Stay also protects co-debtors in consumer cases that are liable for debts together with the debtor.
A Few Limitations of Automatic Stay
Below, I will list some of the limitations of the Automatic Stay. For more information or if you have additional questions, please do not hesitate to contact us at drevzin@revzinlaw.com
1) Debts with no Automatic Stay Protection
Depending on the nature of the debt owed by a bankrupt debtor, certain creditors may pursue their debt claims even after a bankruptcy case is filed. Such claims include, but are not limited to, collection of educational loans, actions for family support, criminal proceedings, and certain actions by taxing authorities.
2) Creditor requests to lift the stay
A creditor may also request the bankruptcy judge to lift the Automatic Stay, through a motion, based on several theories afforded by the bankruptcy code. For example, a secured creditor may request that the Automatic Stay be lifted in order to pursue an action for real property with no equity. If the bankruptcy judge permits the Automatic Stay to be lifted, the creditor can pursue the action allowed under state law.
3) Time Limitations
Debtors who had one pending case dismissed within the last year only get the benefit of the Automatic Stay for 30 days after filing for bankruptcy.
