Bankruptcy ends creditor harassment. You get the automatic stay the moment the bankruptcy is filed. You do not have to go to court to ask for it. Creditors are required to respect it. The automatic stay stops the phone calls, the letters, and ends the feeling of constant harassment. In fact, the automatic stay puts you in control.
What The Automatic Stay Covers
- Your creditors must immediately stop contacting you. It takes them a few days to get the notice of bankruptcy filing, but you can give them your case number.
- The automatic stay stops garnishments immediately.
- The automatic stay stops debt collection lawsuits.
- The automatic stay stops repossession and foreclosure.
- The automatic stay stops eviction.
- The automatic stay prevents your utilities from being shutoff.
- If you lost your drivers license because you were an uninsured motorist or an under insured motorist, you get your license back immediately.
- The collection of an overpayment on public benefits such as social security, worker’s comp, or unemployment; however, this does not apply to a recoupment or later eligibility determination. Recoupment is a complicated area of bankruptcy law that your lawyer can explain to you in more detail.
What The Automatic Stay Does Not Cover
Only a very limited number of debts are not covered by the automatic stay; and, this does not come up often in my cases. If you think that you have a debt that is not covered by the automatic stay, then you should talk to a Seattle – Kent bankruptcy lawyer and I can evaluate your case and explain your options to you.
- The automatic stay does not stop criminal proceedings.
- The automatic stay does not stop actions to enforce or collect on child support, spousal maintenance, or alimony obligations.
- Certain tax proceedings, such as audits and the filing of substitute returns, are not covered by the automatic stay.
- 401(k) loans and other retirement plan loans are not covered by the automatic stay.
- The automatic stay does not prevent non-dischargeability or other adversary proceedings.
- If you have filed bankruptcy in the last year, the automatic stay may be limited to 30 days or not apply at all. You can have the automatic stay extended or reimposed by filing a motion with the court. As a Seattle – Kent bankruptcy lawyer, I’ve helped multiple filers regain the automatic stay.
Can A Creditor Get Around the Automatic Stay?
Yes, but only in certain circumstances. First, unsecured creditors cannot have the automatic stay lifted. Generally, only a secured creditor can have the automatic stay lifted. Even then, they secured creditor has to show that either you do not have any equity in the property, you are behind on payments, or you cannot make payments in the future. If you file a chapter 13 bankruptcy, you can prevent a creditor from lifting the automatic stay, provided you make up the missed payments in your plan. Many creditors will ask for relief from the automatic stay if you are surrendering property, so that they are protected from a stay violation sanction.
What Happens If A Creditor Violates The Automatic Stay?
Very few creditors will knowingly violate the automatic stay, because the sanctions can be so severe. As a result, most creditors will reverse their actions as soon as they are aware of what they have done.
A stay violation usually happens early in the case. This is because the creditor does not have notice of the bankruptcy yet. In these cases, your bankruptcy lawyer can fax the creditor a letter and they will reverse any action immediately. If the creditor refuses to recognize the automatic stay, then they can sanctioned by the court.
Sometimes creditors that are unfamiliar with bankruptcy – i.e. a small business or an individual person – will refuse to respect the automatic stay. This is very rare with banks, credit card companies, debt collectors, and other attorneys. If that happens, then your bankruptcy attorney will file a motion to enjoin further violations of the automatic stay, to reverse any action taken in violation of the automatic stay, and for damages. You can recover actual damages, punitive damages, and attorneys’ fees and costs from a stay violation.