The Automatic Stay in Bankruptcy
What is an Automatic Stay & How Does it Work?
When you file for bankruptcy, something called the “automatic stay” is put into place—effectively stopping creditors in their tracks. Not only can the automatic stay protect you against lawsuits regarding the debt that you owe, but it can also shield you from any further collection efforts by creditors, collection agencies, or government entities.
Essentially, the automatic stay was designed to stop creditors from seizing property that belongs to the bankruptcy estate, as well as any property that is exempt by state or federal law. In most cases, its reach will extend to foreclosures, auto repossessions, wage garnishments, and debt collections, making it a powerful tool for debtors.
With an automatic stay in place, creditors are prohibited from:
- Beginning or continuing a lawsuit
- Continuing their debt collection efforts
- Repossessing a debtor’s property
- Garnishing a debtor’s wages
- Foreclosing on a debtor’s home
How Long Will the Automatic Stay Protect Me?
Generally, the stay will remain in effect for the duration of your bankruptcy case. This means that as long as you are involved in the bankruptcy process, creditors cannot take action against you. However, this also means that the automatic stay will be lifted once you have received a discharge and your bankruptcy case is closed.
Could a Creditor Lift the Automatic Stay?
Although the automatic stay prohibits creditors from continuing their collection efforts, there are certain circumstances under which a creditor could ask the court to remove or “lift” the stay. This is typically true of a creditor who has a lien on your property, although any creditor has the right to request that an automatic stay be lifted.
Your creditor’s request to lift the automatic stay may be granted if:
- You have fallen behind on your car payments
- You have fallen behind on your mortgage payments
- You have not maintained home or auto insurance
- You have delayed debt repayment in Chapter 13
- You have continuously failed to pay your rent
What if a Creditor Violates the Automatic Stay?
If a creditor violates the stay by continuing their collection efforts, attempting to seize your property, or garnishing your wages, they can be penalized by the court. Anyone who willfully violates the stay in your bankruptcy case can be held liable for actual damages caused by the violation and, in some cases, even punitive damages.
Call Allmand Law Firm, PLLC for More Information
If you are facing financial troubles and have considered filing Chapter 7 or Chapter 13 bankruptcy, do not hesitate to speak with a Dallas bankruptcy attorney at Allmand Law Firm, PLLC. As the largest bankruptcy filing firm in the state, we have helped thousands of people find relief from their debt. Now, we’re ready to help you.