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Important Facts About Bankruptcy's Automatic Stay

Posted By admin || 18-Aug-2011

Important Facts About Bankruptcy's Automatic Stay

Facts About Bankruptcy's Automatic Stay

The automatic stay is probably the most important protection provided by bankruptcy.  When a debtor files bankruptcy, the automatic stay stops debtors from taking any action against the debtor.

Below are a few important facts every bankruptcy debtor should know about the automatic stay:

  1. The automatic stay becomes effective from the moment the debtor files bankruptcy.  The creditors are notified of the bankruptcy filing and must stop all actions against the debtor immediately.
  2. The automatic stay will stop wage garnishments and bank levies.  Even if a debtor's wages are garnished or their bank account is seized right before the creditor is notified of the bankruptcy filing, with the help of their Dallas bankruptcy attorney they may be able reverse the creditor actions.
  3. The automatic stay can even stop litigation.  If a debtor is being sued by a spouse, creditor or other entity, once the bankruptcy is filed the legal proceeding must cease. If someone wants to sue a debtor in bankruptcy, they must appeal to the bankruptcy court to lift the automatic stay. However, the bankruptcy court is reluctant to lift the automatic stay and only grants such an appeal after careful consideration.
  4. If a creditor violates the automatic stay, the bankruptcy court may sanction them or even grant money damages to the debtor.  In some cases, where a creditor maliciously violates the automatic stay, the bankruptcy court has awarded sizable money damages to the debtor.
  5. If a debtor's case is closed or any reason or dismissed, the automatic stay is lifted immediately allowing creditors to resume their collections efforts.
Categories: Bankruptcy
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