What Doesn’t The Automatic Stay Stop?
When you file for bankruptcy, an automatic stay will immediately be in effect. This is a powerful advantage for bankruptcy filers. The automatic stay stops any and all collection efforts against you. That includes everything from collections lawsuits, to calls, to letters–absolutely anything that could take your money or property, or which is an attempt to do so, must stop immediately.
However there is a small category of lawsuits or collections activities that are not affected by the automatic stay–in other words, these actions are allowed to proceed, as normal, and won’t stop, just because you file for bankruptcy and the automatic stay goes into effect.
Here are some types of lawsuits or collections efforts that will continue even though the automatic stay is in effect:
Claims against non-debtors – The automatic stay prevents collectors from collecting against you—but only you. That means that if you and your spouse are being sued on, say, a credit card debt, but only you file for bankruptcy, your spouse can continue to be sued. Or, if your business and its subsidiary are sued, and only your business files for bankruptcy, the case against the subsidiary can proceed.
Establishing domestic obligations – Any divorce or paternity proceeding where child support or alimony are being or could be established can continue as normal.
Criminal punishment – Any criminal or civil punishment action brought by a government, such as actions to enforce government fines, or to establish criminal restitution, can proceed–this makes sense given that these debts aren’t dischargeable in bankruptcy anyway.
Licenses – If a professional license is due to be or was revoked or suspended, the automatic stay won’t affect these actions either.
Post-Petition Debts – As a general rule, the debts that you incur after you file for bankruptcy are not included in the bankruptcy, and creditors can continue to collect on them if they were incurred after you filed the case. Debtors often get in trouble when they miss homeowners association dues that are assessed after the filing of the bankruptcy—they think these dues are included in their bankruptcy, but they are not.
Income withholding for plan – Income that is being withheld to pay for a debtor’s pension or profit sharing plan or stock bonus plan
Evictions – A landlord can evict you even with the automatic stay in effect — but only if the judgment of eviction or possession was entered before the bankruptcy case was filed. If it was not, the eviction must stop once you file.
Just because the automatic stay may apply to all other debts, doesn’t mean a creditor can’t ask the court to be excused from the stay. This is rare, but it is very common with secured creditors, such as in foreclosure. Banks will often ask the bankruptcy court for permission to proceed in state foreclosure court against the house of a bankruptcy filer.