Stop Your Creditors through the Automatic Stay

Once you have filed for a bankruptcy, you are effectively protected from the legal actions that your creditors can file against you.

In filing for a bankruptcy, an automatic stay gives you potent legal protection from the actions made by your creditors. In particular, if you are in the danger of having your home foreclosed or getting evicted or other such dangers connected with your financial status, an automatic stay may be a life saver in such dire instances and can be a powerful motive for bankruptcy filing.

What you can avoid with Automatic Stay

Here are some general emergencies that can be affected with an Automatic Stay:

• Disconnection of Utilities – If you are behind payment for your electric, telephone, gas or water bill and you find that these utilities can be cut off anytime, you will be given a 20 day reprieve from such a scenario with the help of your automatic stay. Of course, the amount due for your electric bill may not be justifiable enough to file for a bankruptcy but, in cases where prevention of disconnection of electricity in the middle of January in New England can e a matter of life and death.

• Foreclosure – If you are in imminent danger of losing your house to foreclosure, then automatic stay gives you temporary reprieve from the legal proceedings, but it can never totally stop the procedure which will eventually commence. If you still want to keep your house, then it is best to file for a chapter 13 bankruptcy rather than a chapter 7 bankruptcy.

• Eviction – The automatic stay may give you a bit of reprieve when you are facing eviction, however with the onset of the new bankruptcy law, landlords can still evict you. If your landlord already possesses a judgment against you, your filing of bankruptcy won’t alter the scene.

Further, if the landlord charges you that you are using prohibited drugs or are endangering his property; an automatic stay will do you no good. However, in other cases, an automatic stay can buy you a few days to as much as a few weeks of reprieve from eviction, but your landlord can still ask the court for your eviction and almost always, the court will agree to your landlord’s plea.

• Collection of overpayments of public benefits – Normally, when you have received an overpayment from your public benefits, the agency will just deduct the amount from your future checks. But, if you are under automatic stay, this prevents the deduction from your benefits and this is not a basis for an agency to terminate or deny you of your benefits.

• Multiple Wage Garnishments – When you file for bankruptcy this stops garnishments of your wages at once. Not only are you going to take advantage of getting full wages without deductions, you are also qualified for having these garnishments discharged. A lot of people files for bankruptcy if their wage is threatened by more than one garnishment. Further, only 25% of a person’s wage can be taken to fulfill a court judgment or up to 50% if you have alimony or child support.

Case where an Automatic Stay can’t do anything about

Here are some cases where an automatic Stay has no power or control over:

• A few tax proceedings – The IRS still has the power to demand a tax return or payment or issue a tax deficiency and a tax assessment. Your automatic stay cannot protect you against such proceedings and the IRS can even seize your income or property or issue a tax lien.

• Support actions – A case against you involving alimony or child support cannot be stopped with an automatic stay.

• Criminal Proceedings – If your criminal case can be divided into a debt and criminal components, the latter cannot be remedied but the former, the debt component, can be dealt by the automatic stay. An example of this is writing a bad check and you are sentenced to a fine and community service. You are obliged to fulfill the community service but, the fine given to you can be stopped by the automatic stay.

• Loans from a pension – Money can still be deducted from you pensions, especially is these pensions are work related, even if you are under an automatic stay.

• Multiple Filings – If you have a pending bankruptcy case for the past year and you have filed another case this year, the automatic stay will be terminated within 30 days unless the U.S. trustee, a creditor or you will ask that the stay be continued and that the present case filed was made in good faith. The court may presume that you have acted in bad faith if a creditor has filed a motion to lift the stay on your pending bankruptcy case, in which case you have to prove your innocence in order to get the automatic stay protection for your present case.

Can creditors avoid the Automatic Stay?

Most of the time, creditors can overcome an automatic stay by filing for its removal especially if it does not serve its purpose from the bankruptcy court. One good example for this is when you have filed for bankruptcy just before the day of the auction of your foreclosed house. You have no means to pay your mortgage arrears, you do not have any means to keep the property and you no longer have equity in your house. The creditor will most likely go to court and have the stay lifted and the judge will most likely permit the foreclosing creditor to proceed with the foreclosure.