What Is an Automatic Stay?
An automatic stay is an injunction that is issued automatically upon filing a bankruptcy petition which stops all lawsuits and all other collection activity against a debtor. The automatic stay does not discharge a debt, it merely suspends any proceedings to collect the debt until the stay is lifted or the bankruptcy case ends. An automatic stay restrains creditors from sending collection letters, calling the debtor regarding collection, suing on the debt, garnishing wages, repossessing property, foreclosing on home mortgages, or any other activity to collect a debt. The stay continues until the bankruptcy case concludes.
Are All Legal Actions Subject to the Automatic Stay?
No, there are several exceptions to the automatic stay. The most common actions an automatic stay does not stop are:
- Criminal proceedings
- Establishment, modification, or collection of alimony or child support
- Establishment of paternity
- Audits by governmental units to determine tax liability
- Co-signers or co-debtors
What Can Be Done if a Creditor Tries to Collect a Debt after an Automatic Stay?
If a creditor tries to collect a debt after an automatic stay has been granted, a contempt of court action may be brought against the creditor. In a contempt of court action, the creditor will be made to stop the collection attempts, the creditor may be fined by the court, and the creditor may also have to pay damages caused by a violation of the automatic stay.
Do I Need a Bankruptcy Lawyer?
Filing for bankruptcy is a very complicated process. Bankruptcy law varies depending on where the action is filed and which chapter of bankruptcy is being pursued. A bankruptcy lawyer knows the particulars of filing for bankruptcy, can recommend what chapter of bankruptcy is right for you, and can ensure that your paperwork is filed correctly. If creditors are still trying to collect after a bankruptcy action has been filed, a lawyer may be able to halt such collection efforts and may be able to get you some money damages. |
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