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The Automatic Stay - Answers About This Bankruptcy Benefit
9 January 2022
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When most people think about bankruptcy, they usually focus on the end goal of permanent debt discharge. And while this is the most long-lasting benefit from declaring bankruptcy, it's not the first and may not even be the most important.
One often-overlooked element of all bankruptcy filings is the automatic stay. What is this stay? How can it help you? And what should you know about it? Discover a few answers.
What Is the Automatic Stay?
The automatic stay is a legal action that prevents further collection efforts from happening. It's a federal injunction that courts can enforce. While this stay does nothing to discharge or reduce any debts you owe, it pauses nearly all actions until the borrower can sort out their situation and seek the legal protection they have a right to.
Why Is the Stay So Important?
Many people who reach the point of needing bankruptcy have already struggled with debts for some time. This often means that they might be behind on a number of payments, including their mortgage or rental lease, necessary vehicles, utilities, taxes, and personal loans.
Unfortunately, being behind on payments means that creditors may have already started the processes of seizing assets. You, therefore, may not have months or years to wait for debts to be discharged. You need help now.
What Does the Stay Prevent?
The most common benefits of the bankruptcy stay are to prevent the lender from repossessing your vehicle or foreclosing on your house. But a bankruptcy stay does much more than that. It also prevents some or all of the following actions:
Clearly, the stay can provide you breathing room on a number of fronts.
Does the Stay Last Forever?
Although the bankruptcy stay is routine and starts as early as 24 to 48 hours after filing, it's not designed to be a permanent measure. The stay will lift, in general, when the bankruptcy case is done. At that point, creditors can resume collection on unaffected debts. And discharged debts are now covered by a permanent injunction rather than the temporary one.
What Can Affect the Automatic Stay?
To get the most benefit from the bankruptcy stay, understand what can cause it to be dropped. First, individual creditors can petition for an exemption on various grounds. If the debt will not be subject to discharge during the bankruptcy, it may be released to proceed as normal. Lenders of secured debts attached to collateral may request an exemption if no equity is in the item.
Less commonly, a creditor may request exemption from the bankruptcy court if the debt involves fraud, to let an unrelated legal case move forward, or if the borrower confirms that they will not seek to reaffirm a secured debt.
Finally, the court may drop or limit stay protection if it finds that filer to be a serial filer. A person who files multiple bankruptcy claims within a short period - often one year - may be deemed serial filers trying to take advantage of the system.
Where Can You Learn More?
Do you need the protection of an automatic stay? Want to know more about how your particular debts or assets would be affected? Worried you may not qualify for a stay? No matter what your questions are, find answers by consulting with Custer Custer & Clark LLC . We will help you get the protection you need to start fixing your financial life and creating a brighter future.
One often-overlooked element of all bankruptcy filings is the automatic stay. What is this stay? How can it help you? And what should you know about it? Discover a few answers.
What Is the Automatic Stay?
The automatic stay is a legal action that prevents further collection efforts from happening. It's a federal injunction that courts can enforce. While this stay does nothing to discharge or reduce any debts you owe, it pauses nearly all actions until the borrower can sort out their situation and seek the legal protection they have a right to.
Why Is the Stay So Important?
Many people who reach the point of needing bankruptcy have already struggled with debts for some time. This often means that they might be behind on a number of payments, including their mortgage or rental lease, necessary vehicles, utilities, taxes, and personal loans.
Unfortunately, being behind on payments means that creditors may have already started the processes of seizing assets. You, therefore, may not have months or years to wait for debts to be discharged. You need help now.
What Does the Stay Prevent?
The most common benefits of the bankruptcy stay are to prevent the lender from repossessing your vehicle or foreclosing on your house. But a bankruptcy stay does much more than that. It also prevents some or all of the following actions:
- Shutting off utilities
- Seizing money from bank accounts to offset debts
- Experiencing foreclosure or repossession of other assets
- Filing new levies or liens
- Stopping wage or bank account garnishments
- Experiencing the pursuit of lawsuits
- Getting the collection of overpaid benefits
- Receiving debtor phone calls, visits, or letters
Clearly, the stay can provide you breathing room on a number of fronts.
Does the Stay Last Forever?
Although the bankruptcy stay is routine and starts as early as 24 to 48 hours after filing, it's not designed to be a permanent measure. The stay will lift, in general, when the bankruptcy case is done. At that point, creditors can resume collection on unaffected debts. And discharged debts are now covered by a permanent injunction rather than the temporary one.
What Can Affect the Automatic Stay?
To get the most benefit from the bankruptcy stay, understand what can cause it to be dropped. First, individual creditors can petition for an exemption on various grounds. If the debt will not be subject to discharge during the bankruptcy, it may be released to proceed as normal. Lenders of secured debts attached to collateral may request an exemption if no equity is in the item.
Less commonly, a creditor may request exemption from the bankruptcy court if the debt involves fraud, to let an unrelated legal case move forward, or if the borrower confirms that they will not seek to reaffirm a secured debt.
Finally, the court may drop or limit stay protection if it finds that filer to be a serial filer. A person who files multiple bankruptcy claims within a short period - often one year - may be deemed serial filers trying to take advantage of the system.
Where Can You Learn More?
Do you need the protection of an automatic stay? Want to know more about how your particular debts or assets would be affected? Worried you may not qualify for a stay? No matter what your questions are, find answers by consulting with Custer Custer & Clark LLC . We will help you get the protection you need to start fixing your financial life and creating a brighter future.
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