Posted by on June 20, 2016 under Bankruptcy Blog | 
The automatic stay goes into effect simultaneous with the filing of your bankruptcy petition. The “petition” is the document “commencing a case under [the Bankruptcy Code].” Sections 101(42) and 301(a). So the very act of filing the petition itself “operates as a stay.” Section 362(a).
The instantaneous effect of the automatic stay is amazing especially in comparison to most other court procedures. Most take weeks, or even in the case of emergencies at least days or hours. Usually some kind of request or motion needs to be filed to get the court’s attention, the other side is given some opportunity to respond, and then there may be a hearing of some sort, before finally a judge makes a decision.
But the automatic stay skips all that. It is, at least at the beginning, completely one-sided, in your favor. You “win” an immediate court order, without the creditors having any immediate say about it, without involving a judge at all.
So the automatic stay gives you an immediate breathing spell, freezing all collection efforts against you, whether your creditors like it or not.
Awesomely Broad Protection
This break from your creditors covers “any act to collect, assess, or recover” a debt—just about anything a creditor could do to.
Besides stopping all collection phone calls and bills, the automatic stay stops all court and administrative proceedings against you from starting, or from continuing. If your bankruptcy is filed right before a lawsuit is to be filed at court against you, the lawsuit can’t be filed. Same with a home foreclosure. A prior judgment against you can’t result in your paycheck or bank account being garnished. If you’re behind on your vehicle loan payments, the repo man can’t come looking for your vehicle. If you owe back income taxes to the IRS, it can’t record a tax lien against your home and vehicle.
The automatic stay is powerful stuff.
“Relief” from the Automatic Stay
Any creditor can ask the court to cancel the automatic stay so that the creditor can again take action against you, your assets, or the collateral in particular. The most common situation for this is a creditor asking for the right to take back the collateral securing the debt—to repossess a vehicle or to start or continue a home foreclosure. Whether or not the court will give it this right, or give “relief from stay” in any situation, depends on all the details of the case. It requires a careful analysis to be done by and discussed with your attorney.
Exceptions or Limitations to Automatic Stay
There are some, and we will address some of them in upcoming blog posts.
Posted by Kevin on April 10, 2015 under Bankruptcy Blog |
The appropriately criticized Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) tried to prevent perceived abuses of the bankruptcy laws in a number of ways. One of them you’ve probably not heard about and can give you a bad surprise if you stumble into it.
The Bad Surprise
Beside the legal write-off (“discharge”) of your debts, the other big benefit you usually get from filing bankruptcy is protection from your creditors. That legal protection is called the “automatic stay,” and prohibits creditors from pursuing you or your money or your other assets. It goes into effect the moment your bankruptcy case is filed, and lasts throughout the life of your case—the few months of a Chapter 7 case and the few years of a Chapter 13 case (unless a creditor files a motion and gets special court permission, the so-called creditor’s “relief from stay”).
But imagine filing a bankruptcy and getting no protection at all from your creditors. Being in a bankruptcy case with the creditors still being able to call you, sue you, garnish your wages. Imagine this happening when you totally don’t expect it. That WOULD indeed be a bad surprise.
Having this happen is very rare, but considering the extreme consequences you want to make absolutely sure that it does not happen to you.
The Abuse Being Addressed
The problem arises in certain circumstances if you filed a prior bankruptcy case which got dismissed—closed without being completed. Before Congress put this law into effect, a very, very small minority of people filing bankruptcy–usually people without attorneys representing them—would file a series of bankruptcies, one after another, for the purpose of continuously delaying a foreclosure or some other action by a creditor. After their first bankruptcy case would get dismissed, they would file another one just in time to again impose the “automatic stay” and stop the foreclosure or other creditor action, and then repeat the cycle. You can see how this could be seen as an abuse of bankruptcy in general and abuse of the “automatic stay” protection in particular.
The Rules
So this is the law that Congress passed to counter this. It has two main parts.
First, if you are filing a bankruptcy case now, AND you filed ONE previous bankruptcy case during the one year before filing this new one, AND that previous case was dismissed, the “automatic stay” goes into effect when you case is filed BUT AUTOMATICALLY EXPIRES after 30 days UNLESS before that time we convince your bankruptcy judge that you meet certain conditions so that the “automatic stay” continues. See Section 362(c)(3) of the Bankruptcy Code.
Second, if you are filing a bankruptcy case now, AND you filed TWO OR MORE previous bankruptcy cases during the one year before filing this new one, AND those two cases were dismissed, then the “automatic stay” does NOT GO INTO EFFECT AT ALL with the filing of the new case. The “automatic stay” CAN go into effect AFTER the case is filed if within 30 days of the date of filing we convince your bankruptcy judge that you meet certain conditions so that the “automatic stay” gets imposed. See Section 362(c)(4).
The details of the conditions that must be met to continue or impose the “automatic stay” in these two circumstances are beyond the scope of this blog, but they require you to establish your “good faith” about why the previous case(s) was (were) dismissed and why you filed the new one.
Some Important Practicalities
If you have never filed a bankruptcy case, or have definitely not done so in the last year, then you don’t need to worry about any of this. And even if you have, these rules don’t apply to you unless your prior case(s) was (were) dismissed. Usually you would know if you’ve had a case dismissed.
Nevertheless, keep in mind that people get unexpectedly tripped up on these rules more often than you might think. It tends to happen one of three ways:
1) A person files a bankruptcy without an attorney, gets overwhelmed by the process and doesn’t follow through, so the case gets dismissed. The person may think he or she didn’t “really” file a bankruptcy case, or may simply forget about it under the stress of the time months later when filing another case.
2) A person sees an attorney, signs some papers, and the case gets filed at court, maybe without the person fully realizing it, and then gets dismissed because he or she doesn’t follow through and doesn’t stay in touch with the attorney. Months later, while seeing another attorney or trying to file a new case without one, the person isn’t aware that he or she had filed that previous case, and/or has forgotten all about it.
3) A person’s Chapter 13 case is dismissed because changed circumstances make it impossible to make the court-approved plan payments. Months later, when creditors are causing problems again he or she files a Chapter 7 without an attorney. Not realizing that the previous Chapter 13 case ended by being dismissed, in the new case the “automatic stay” expires after 30 days, letting all his or her creditors resume all collection activity.
To Be Safe…
Prevent any of this happening to you by 1) carefully considering whether you might have somehow filed a bankruptcy case within the last year, and 2) if there’s ANY chance that you did, telling your attorney in your new case right away. If you did file a case that got dismissed, there is a good chance that your attorney will be able to persuade the bankruptcy court to impose or retain the automatic stay. But that will only happen if your attorney knows about the issue in advance and determines whether your case will meet the necessary conditions.
Posted by Kevin on May 21, 2013 under Bankruptcy Blog |
Chapter 13 protects you while you catch up on your vehicle loan, or you may not need to catch up on that loan at all.
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Chapter 7 sometimes gives you just enough of a break and enough time to catch up on your vehicle loan if you’re behind. But usually it only buys you a couple months. Chapter 13 gives you many months, or even a couple years, to catch up. And if you got your loan more than two years and a half years ago, and you owe on it more than the vehicle is worth, you probably won’t even have to catch up on any missed payments. And you will likely pay less per month, and pay less on the loan overall until you own it free and clear.
The Law of Vehicle Loans Arrears
A vehicle loan is in effect made up of two commitments you’ve made to your lender:
- a promise to pay a certain amount each month, plus interest, until the debt is paid off; and
- a lien on the vehicle, giving the lender a right to repossess your vehicle if you fail to keep your promise to pay.
If right before filing bankruptcy you were behind on your vehicle payments, your lender would have the right to repossess your vehicle. But once you file a bankruptcy case, the “automatic stay” stops any repossession. This protection lasts as long as the bankruptcy case is open, unless the lender files a motion to get “relief from the automatic stay” and gets earlier permission to repossess.
Vehicle Loans in Arrears in Chapter 7
If you are not current on a vehicle loan and want to keep that vehicle, a Chapter 7 would be a sensible option if you know you will be able to bring that loan current within about two months of your bankruptcy filing. Certain vehicle lenders might be more flexible and give you more time, but that’s not common. Ask your attorney about the likely practices of you lender when you discuss your vehicle loan options.
Vehicle Loans in Arrears in Chapter 13
If you need more time than two months or so to catch up on your vehicle loan, then Chapter 13 may be the right option for you. In most situations you would be allowed to catch up over a period of many months, potentially even a few years.
In some situations you may not even need to catch up at all. This happens if, and only if, 1) you took out the loan more than 910 days (about 2 and a half years) before you file your Chapter 13 case, and 2) your vehicle is worth less than your debt against it. If so, you will not only NOT need to catch up on the loan, you will usually be able to pay a lower monthly payment, often a lower interest rate, and less on the loan overall, and then you will own the vehicle free and clear at the end of the case.
This is informally called a vehicle loan “cramdown,” and can ONLY be done under Chapter 13, not under Chapter 7.
Even if you are current on your vehicle loan, or could catch up within two months or so, and therefore would likely be able to keep your vehicle under Chapter 7, IF your vehicle is worth significantly less than what you owe on it you should talk with your attorney about how much money a Chapter 13 could save you through a “cramdown.” This might especially make sense if Chapter 13 also helps you in other ways.
