Featured News 2013 The Automatic Stay: What It Can and Cannot Do

The Automatic Stay: What It Can and Cannot Do

Whether you file for Chapter 7 or for Chapter 13 bankruptcy, an automatic stay will go into effect. This powerful benefit of bankruptcy will put a pause on any lawsuits you face, and it will stop most creditors from being able to collect from you. This can be a very appealing solution to many difficulties you face, such as being faced with having your utilities disconnected, going into foreclosure, being held in contempt of court for not paying child support, and more. Of course, there are limits on this benefit as well, which means it will be vital to fully consider what an automatic stay means before pursuing bankruptcy.

Let us first examine what automatic stays can accomplish. While the fear of losing your utilities is almost never enough reason on its own to file for bankruptcy, it may be one of the problems you face. If you are behind on your utility bills and you might lose water, electricity, gas, etc., then the automatic stay will keep any utilities from becoming disconnected for 20 days, if not more.

If you are in foreclosure, then an automatic stay would halt the process for as long as bankruptcy takes. This means a few months' respite under Chapter 7 bankruptcy, and a few years' in Chapter 13. If foreclosure is imminent, then you could stall the process for the same amounts of time. This does not guarantee that you will save your home, of course, but it might give you the time to get caught up on your mortgage, especially if you go through Chapter 13 reorganization bankruptcy.

The power of the automatic stay is much more limited when it comes to staving off eviction. An automatic stay may prevent your being evicted for a few days, maybe even a couple of weeks, but a landlord has legal options for removing the stay and letting the eviction process to continue. Also, if you have been accused of endangering the property, or of drug abuse in the residence, then an automatic stay cannot do anything about the eviction process. A landlord with a judgment of possession can also evict you, regardless of an automatic stay.

An automatic stay might also help you if public benefit agencies are trying to collect from you. If you were paid extra for anything, these agencies will want the surplus returned. With an automatic stay, you would not have to pay this back yet. You can also avert wage garnishments through an automatic stay. If you are already getting part of your paycheck cut out because of a wage garnishment, you can avoid another one from taking effect through bankruptcy's automatic stay. In this way, you may be able to see your full salary again, and you might be able to discharge these debts.

Unfortunately, an automatic stay cannot do anything against some tax actions. You are not protected from an IRS audit, getting a tax deficiency notice, and more. At least the automatic stay would keep the IRS from making a tax lien and from taking your wages and property. Bankruptcy is powerless, however, against support court orders. This can mean that you still have to comply with paternity actions, and any child support and alimony court orders. Any criminal trials or sentences are not suspended either. Perhaps you were sentenced to community service and a fine. An automatic stay might delay your payment of the fine, but the rest of your sentence will continue unchanged.

If you filed for bankruptcy within the last year and the stay was lifted, then a judge is likely to think you re-filed in bad faith. This can be a serious obstacle in the process. In some circumstances, creditors can lift the stay and collect from you. There are further benefits and drawbacks to bankruptcy and the automatic stay. Learn more when you consult an experienced bankruptcy attorney.

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