What is the “Automatic Stay” in a Bankruptcy Filing?
Choosing to file for bankruptcy can be a difficult but necessary decision for individuals struggling financially. When you decide to file for bankruptcy, an automatic stay might go into effect, giving you the immediate relief you need to move forward.
In bankruptcy cases, an automatic stay places a pause on certain actions by creditors. When an automatic stay is in effect, creditors are not allowed to engage in certain debt collection efforts. Not all debts are protected by an automatic stay. Although an automatic stay can last for the duration of your bankruptcy, that doesn’t mean it will. Creditors can motion for an automatic stay to be lifted, making you vulnerable to harassment. In order to keep an automatic stay in effect throughout bankruptcy, hire an experienced attorney to represent you.
Our lawyers are here to help you regain financial stability by filing for bankruptcy. For a free case evaluation with the Pennsylvania bankruptcy lawyers at Young, Marr, Mallis & Deane, call today at (215) 701-6519 or (609) 755-3115.
What is a Bankruptcy Automatic Stay?
For those struggling to handle their debts and financial difficulties, filing for bankruptcy may be the solution. In most cases, as soon as debtors file a claim with help from a bankruptcy attorney, an automatic stay will go into effect. But what is an automatic stay, and what does it mean for your bankruptcy case?
In a bankruptcy claim, an automatic stay essentially pauses certain debt collection efforts by creditors. This is relief immediate and requires no additional paperwork on behalf of bankruptcy filers. Once you have filed for bankruptcy in federal court, an automatic stay will go into effect provided you meet the necessary criteria.
When an automatic stay goes into effect, creditors are no longer permitted to contact you regarding certain debts. They will be paid in due time, whether by liquidating your assets or through a repayment plan, the specifics of which will be determined during your bankruptcy case. With an automatic stay in place, creditors will no longer be allowed to call or harass you regarding certain outstanding debts.
An automatic stay can provide instant relief to debtors regarding certain debt collection efforts. Remember, this perk only goes into effect once you have filed for bankruptcy in your state. Hire a Cherry Hill bankruptcy lawyer to use an automatic stay to your advantage and ease the stress surrounding your debts. Your attorney can help you file for bankruptcy and get an automatic stay so that creditors’ debt collection efforts cease.
It’s also important to note that while an automatic stay is in effect, creditors cannot bring litigation against you, continue wage garnishments, or engage in other similar actions. You will also be safe from home foreclosure efforts, eviction, vehicle repossession, disconnection of utilities, and more. To learn more about how an automatic stay can help you get relief from financial difficulties, hire a lawyer right away.
Does an Automatic Stay Apply to All Debts?
Automatic stays are only effective against the collection efforts of certain debts. Learning which of your debts are covered by an automatic stay and which are not is important. Otherwise, you may be under the impression that you no longer have an immediate financial liability to a creditor, causing you to fall further into financial instability.
After an automatic stay has gone into effect for your bankruptcy case, speak to your attorney. Your lawyer can explain which of your debts are covered and which are not. There are exceptions to automatic stays, which don’t protect against collection efforts for certain debts. Often, these are “non-dischargeable” debts.
For example, an automatic stay cannot and will not stop any litigation attempting to establish or collect alimony or child support. The IRS is also allowed to demand tax returns and perform audits on debtors when an automatic stay is in place. Automatic stays are not likely to affect criminal cases involving debt issues either. Liability for certain loans, like those from job-related pensions, are also unlikely to be affected by an automatic stay.
Remember, certain non-dischargeable debts are unaffected by an automatic stay. That means you may remain immediately liable for payments to creditors despite an automatic stay being in place. To learn which debts are covered by an automatic stay and which are not, speak to your bankruptcy attorney. It is crucial to remain abreast of your debt liability and prevent it from worsening.
How Long Can an Automatic Stay Last?
In the best-case scenario, an automatic stay will last for the duration of your bankruptcy. Generally, the length of an automatic stay will depend on the specific type of bankruptcy you choose to file for, either Chapter 7 or Chapter 13. Learning how long an automatic stay is likely to last is important so that you know what to expect during bankruptcy.
Generally, an automatic stay will remain in effect throughout an entire bankruptcy, with exceptions. If you filed for Chapter 7 bankruptcy, which allows filers to pay their debts by liquidating their assets, an automatic stay might last anywhere from three to five months. Because Chapter 7 bankruptcy allows for faster repayment of debts, an automatic stay for a Chapter 7 filer may be quite short.
If you file for Chapter 13 bankruptcy, an automatic stay may last anywhere from three to five years. Chapter 13 bankruptcy doesn’t require liquidation of assets and instead allows debtors to pay creditors via a court-approved repayment plan. Depending on the size of your debts and your current income, an automatic stay and a Chapter 13 bankruptcy may last several years.
It is important for debtors to understand that each bankruptcy case is unique. While an automatic stay will likely go into effect if you file for either Chapter 7 or Chapter 13 bankruptcy, it may affect your case differently than others. Ask an attorney for insight to better anticipate how long an automatic stay may remain in effect as you attempt to regain financial stability. An experienced Bucks County bankruptcy lawyer can assess your case and all its factors and estimate how long an automatic stay will last.
Can Creditors Lift an Automatic Stay?
While automatic stays can provide instant relief for debtors and remain in effect for the duration of bankruptcy, they are not guaranteed to last. In fact, automatic stays can be lifted if a creditor has reason to request so. To prevent that from happening, hire an experienced bankruptcy attorney who can help you navigate your claim.
In certain circumstances, an automatic stay might be lifted, meaning filers no longer have protection from certain debt collection efforts. When an automatic stay is removed, creditors can then restart debt collection efforts, leaving you vulnerable to harassment and litigation from creditors and debt collectors.
In order to lift an automatic stay, creditors must file a motion of relief from the automatic stay. If successful, you will become responsible for paying certain debts immediately. Regardless of whether or not you are preparing a repayment plan or are in the process of liquidating your assets, creditors who have been relieved from an automatic stay might begin hounding you for payments.
You may wonder why creditors would want an automatic stay lifted when they will be paid back through a bankruptcy case. Certain creditors, namely secured creditors like mortgage lenders and car lenders, are more likely than others to file a motion of relief from the automatic stay. Secured creditors generally have a bigger stake in the game, so to speak. They either want to get paid immediately or repossess your property by getting an automatic stay lifted.
Depending on your payment history to certain creditors, a motion of relief from the automatic stay may be more or less likely to succeed. Remember, once an automatic stay is lifted, you are vulnerable. Without an automatic stay, you won’t have the time you need to take a breath and organize your finances. An experienced attorney can fight against a motion of relief stay to ensure you remain protected from persistent creditors while in bankruptcy.
Can Debtors Unintentionally Lift an Automatic Stay?
Unfortunately, debtors might lift an automatic stay in a bankruptcy case without even realizing it. Failure to meet certain benchmarks or follow through with your intentions can cause an automatic stay to be lifted automatically.
Automatic stays can also be lifted without request from a creditor if a debtor fails to follow through with their statement of intentions during a Chapter 7 bankruptcy case. A statement of intentions in a Chapter 7 bankruptcy case is a document where debtors list all secured debts and identify how they will amend them. Debtors can choose between the following four options when setting an intention regarding their debts:
- Surrender the property
- Redeem the property
- Reaffirm the debt
- Retain the property
Each option comes with pros and cons and the choices you make will depend on your personal finances. Once you have set your intentions for dealing with your secured debts, you must take the necessary steps to see them through within the next month. If you have not done so within 30 days, an automatic stay will be lifted, leaving you vulnerable to creditors. To prevent this from happening, hire an experienced bankruptcy attorney.
Will You Get an Automatic Stay if You Have Previously Filed for Bankruptcy?
An automatic stay can provide you with the immediate relief you need to regain your footing while heading into bankruptcy. Because of that, an automatic stay is a privilege of sorts. If you’ve never filed for bankruptcy before, you can benefit from an automatic stay so long as you follow the rules of your bankruptcy. However, if you’ve previously struggled financially and filed for bankruptcy, you might become ineligible for an automatic stay.
Prior bankruptcies can affect your eligibility for an automatic stay. If you filed for bankruptcy in the past year and file again, an automatic stay for your current case will only remain in effect for 30 days. After that point, it will be automatically lifted unless your Philadelphia bankruptcy lawyer files a successful motion to extend the automatic stay in time.
If you have filed for bankruptcy multiple times in the past year, you will not be granted an automatic stay without provocation. To get a stay on debt collection while under bankruptcy, your attorney must file a motion to impose the automatic stay. Otherwise, debt collectors will not be prevented from harassing you about payments during your bankruptcy case.
What Happens if a Creditor Violates an Automatic Stay?
Automatic stays exist to protect debtors from harassment as they attempt to regain financial stability. If a creditor violates the rules of an automatic stay while it is in place and continues to contact you about outstanding debts, inform your bankruptcy attorney. Violating an automatic stay can come with serious consequences for creditors.
An automatic stay can provide relief for debtors, even temporarily. If a creditor chooses to violate an automatic stay, tell your lawyer. Willfully violating an automatic stay can make a creditor liable for certain costs, like attorney’s fees and other damages. Violating an automatic stay can also make a creditor liable for punitive damages in some cases.
Filing for bankruptcy is a responsible choice to make when dealing with financial struggles. This is why filers are rewarded with automatic stays. Ignoring a stay on debt collection and proceeding to harass debtors trying to regain their footing is not permitted. If a creditor attempts to contact you in any way about debt collection without your attorney present, inform your lawyer. They may have violated the automatic stay, opening them up to severe consequences.
Call Our Attorneys About Your Bankruptcy Case Today
If you need to regain your financial stability by filing for bankruptcy, your attorneys can help. For a free case evaluation with the Chester County bankruptcy lawyers at Young, Marr, Mallis & Deane, call today at (215) 701-6519 or (609) 755-3115.