Understanding the Automatic Stay in Bankruptcy

Posted By Hensel Law Office, PLLC || 4-Dec-2012

Once a debtor files for bankruptcy, they typically notice the immediate benefits of what is called the "automatic stay." What is the automatic stay and how does it affect you directly? The automatic stay is automatic injunction (a legal order) that immediately halts creditors from collecting on debts from a debtor who has filed bankruptcy.

Under 11 USC §362 – Automatic Stay, once a debtor files a bankruptcy petition, it is unlawful for the creditors to do the following:

  1. Commence or continue a proceeding or action against the debtor, or to recover a claim against the debtor for a debt that arose before the filing.
  2. To enforce against the debtor or their property, any judgment obtained before the debtor filed for bankruptcy.
  3. To commence any act where the creditor attempts to obtain possession over the debtor's property or property of the debtor's estate.
  4. To enforce any lien against the debtor's property.
  5. Any act to try and collect or recover money owed by the debtor prior to filing bankruptcy.

What cannot be protected by the automatic stay is matters regarding: 1) civil actions or proceedings, 2) paternity establishment, 3) spousal support modifications, 4) any matters pertaining to child custody or visitation, 5) divorce, except for the division of property of the estate, 6) matters regarding domestic violence, 7) overdue child support, 8) the interception of a tax refund, and 9) the enforcement of a medical obligation under title IV of the Social Security Act.

If the creditor has received adequate notice that you filed for bankruptcy yet they continue contacting you and attempting to collect the debt, they can actually face legal consequences including penalties as a result of them violating the law.

For most Chapter 7 and Chapter 13 filers, they experience great relief once the automatic stay goes into effect. It generally means those harassing and upsetting collector calls cease, and all collection letters in the mail stop coming as well. You no longer have to fear answering your phone or opening up your mail.

If you are interested in learning more about the many benefits of bankruptcy, please feel free to contact attorney Thomas Hensel from the firm today. We look forward to meeting with you in person and helping you find the most workable debt relief strategy for you.

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