Automatic Stay

Posted by Kevin on October 19, 2009 under Bankruptcy Blog | Comments are off for this article

Every advertisement or website concerning bankruptcy will include the following statements, “Stop foreclosure”, “Stop wage garnishment”. What stops the foreclosure or the garnishment is the automatic stay.

The filing of a bankruptcy petition, in and of itself, stops (or stays) most collection efforts automatically. This includes lawsuits, garnishment of wages, levies on bank accounts and foreclosure sales. It also includes harassing telephone calls, letters and emails.  If a creditor continues collection efforts after the petition is filed, the Court may impose a fine on the creditor or order the creditor to pay damages to the debtor.

As soon as we are retained, we instruct our clients to refer all creditor calls to our offices. We deal with your creditors and get them to stop calling even before the bankruptcy is filed.

The automatic stay lasts until it is terminated by the court, the case is dismissed or a discharge is granted. In addition, in a Chapter 7 the stay as to a specific piece of property expires when the Trustee abandons that property on notice to creditors and the court.

As with most rules, there are exceptions to the automatic stay. The automatic stay does not apply to co-signers or guarantors in a Chapter 7.  So if a husband and wife are on the debt and only the wife files under Chapter 7, the creditor can still go after the husband. The automatic stay does not stop a criminal proceeding, or the commencement or continuation of an action concerning paternity, divorce or domestic support obligations. The automatic stay does not apply to certain IRS actions.

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