5 Things To Know About The Automatic Stay In Bankruptcy
One of the most powerful tools in a consumer bankruptcy case is the automatic stay. It is an injunction that stops creditors from beginning any debt collection actions against the creditor, as well as from continuing to take any debt collection actions against the creditor or their property. If you are considering filing for personal bankruptcy in West Palm Beach, it is important to understand what the automatic stay can do and, conversely, what it cannot do for you. The following are five things to know about the automatic stay in bankruptcy.
- Automatic Stay is an Injunction Imposed Against Creditors When You File Your Bankruptcy Petition
When a debtor files a petition for bankruptcy—whether under Chapter 7, Chapter 11, Chapter 13, for example—an injunction will be imposed against most of the creditors connected to the debtor’s case. That injunction is known as an “automatic stay” under Section 362 of the U.S. Bankruptcy Code. The injunction prevents creditors from continuing to take actions designed to collect debts or to repossess the debtor’s property.
- Automatic Stay Can Stop a Foreclosure
The automatic stay can stop a foreclosure, but the extent of the automatic stay protections will depend on the type of bankruptcy. If a debtor is filing for liquidation bankruptcy under Chapter 7, the automatic stay will only temporarily stop the foreclosure proceedings from moving forward. Differently, with a reorganization bankruptcy under Chapter 13, for example, the debtor can use the automatic stay to stop the foreclosure and then can rely on the repayment plan in order to catch up on unpaid mortgage debt.
- Creditors Can Ask the Bankruptcy Court for Relief from the Automatic Stay
When the automatic stay stops a creditor from continuing to take action against a debtor who has filed for bankruptcy, the creditor can file a Motion for Relief from the Automatic Stay in order to ask the court to lift the protections of the automatic stay. The court typically only grants these types of motions in certain circumstances, such as in some foreclosure cases or in cases involving ongoing lawsuits.
- Automatic Stay Applies to Most Creditors
The automatic stay applies to most types of creditors (and most types of debt). Generally speaking, for debts that are dischargeable in bankruptcy cases, you can anticipate that the automatic stay will likely apply to the creditor.
- Some Types of Debt and Creditors Are Not Covered By the Automatic Stay
Some kinds of creditors, and specific types of debt, are not stopped by the automatic stay. For example, the automatic stay does not typically apply to the federal government in its capacity to seek tax debt, or to parties who have filed lawsuits for back-owed family support.
Seek Advice from a West Palm Beach Bankruptcy Lawyer
If you have any questions about how the automatic stay will affect your financial situation once you apply for bankruptcy, or if you want to know more about the protections provided by the automatic stay, an experienced West Palm beach bankruptcy attorney at our firm can help. Contact Kelley, Fulton & Kaplan to learn more about the services we provide to debtors in South Florida.