The automatic stay of bankruptcy represents the most important protection available to you if you file Chapter 7 or Chapter 13.
Literally the minute your attorney presses the “file” button and the Clerk of Bankruptcy Court for the Northern District of Georgia electronically issues a case number, you are protected from all creditor action because of the automatic stay.
The stay protects you even if creditors don’t know that you have filed.
- If, for example, you file Chapter 13 at 9:23am on foreclosure Tuesday, and the attorney for the mortgage company accepts a foreclosure sale bid at 9:24am, you are protected – that sale can be voided.
- If the repossession company is circling your block with a tow truck and you file before your car is towed away, you are protected and the vehicle lender will have to return your car.
- If a credit card company obtained a judgment against you and files paperwork to garnish your wages tomorrow but you file bankruptcy today, you are protected and the judgment creditor must return your money.
Purpose of the Automatic Stay
The automatic stay exists to give you breathing room – a chance to look at your debt problems clearly and rationally, without the pressure of looming creditor action. In other words, the automatic stay of bankruptcy can present you from losing your house, car, bank accounts, wages or other assets while you consult with your Atlanta bankruptcy attorney about how to best proceed.
While the stay is in force, not only must creditors discontinue all legal action but they are not allowed to call you, write you or make any effort to collect debt.
Automatic Stay Protection Not Absolute
As you might expect, there are some exceptions to the general rule that the automatic stay protects you from all adverse creditor action.
First, there are some debts that are no impacted by the stay at all. Most child support collection actions won’t be halted by the automatic stay, nor will certain tax collection actions. Criminal proceedings won’t be halted, nor will some evictions. Congress created these limited exceptions to the automatics stay in an effort to combat abuse of the bankruptcy process.
Second, the automatic stay may only apply for a limited period of time or not at all if you have previously filed a bankruptcy case that was dismissed. Generally speaking a 2nd or 3rd bankruptcy case filed within one year from the dismissal date of case #1 won’t be fully protected. This is why you must advise your lawyer if you were previously a debtor in a Chapter 7 or Chapter 13 case. Click here to read an article from my blog about when you can and cannot file a 2nd or 3rd bankruptcy case.
Third, creditors do have the right to ask the bankruptcy judge to lift the automatic stay so they can resume collection. Hearings on motions to lift stay are generally scheduled 2 to 4 weeks after these motions are filed.
Peace of Mind
For most first time bankruptcy filers, the automatic stay can offer a great deal of peace of mind because it gives you time to consult with your lawyer and come up with a plan of action for using bankruptcy to eliminate, reduce or manage your debt.
If you would like to learn more about how bankruptcy can help you, please call our office at 770-393-4985.
