Filing for bankruptcy results in a court order called the automatic stay. It helps to immediately stop most collection actions filed against you by any creditor, collection agency, or government entity. In addition, bankruptcy can prevent you from being evicted, foreclosure, repossession, loss of essential resources like utility, and wage garnishments. This relief can be temporary or permanent in some cases.
What can Automatic Stay Prevent?
The automatic can help you prevent utility disconnections when you are behind utility bills and face disconnection of water, gas, telephone service, electricity. Disconnection can be prevented for up to 20 days with the help of automatic stay. After that, however, you might be required to pay a deposit to the utility company to ensure future payment. The automatic stay can also prevent foreclosure proceedings. If you want to keep your home, opting for chapter 13 bankruptcy is better as it allows you to catch up on back payments through the 3- to 5-year repayment plan. On the contrary, Chapter 7 bankruptcy does not have any means to protect your property if you are behind the payments. As a result, the automatic stay will provide temporary relief from foreclosure.
The automatic stay might help you from being evicted, but this is usually a temporary relief. If the landlord already has an eviction judgment against you, the automatic stay cannot help you. The automatic stay can also prevent multiple wage garnishments allowing you to take home the full salary. Unfortunately, wage garnishing for ongoing alimony and child support cannot be discharged in bankruptcy.
What Automatic Stay Cannot Prevent?
Filing for bankruptcy and subsequent automatic stay cannot help you with tax proceedings. The IRS can still audit you and ask for a tax return. However, automatic stay provides a temporary relief on the seizure of your property or income by the IRS. The bankruptcy filing cannot stop a lawsuit from collecting alimony or child support. Similarly, any criminal proceedings are not stopped by the automatic stay. For example, suppose you had filed for bankruptcy multiple times during the previous year. In that case, the automatic stay terminates after 30 days unless a continuance is asked. If a creditor asks for a motion to lift the stay because you previously acted in bad faith, the court might oblige.
Can creditors ask for the lifting of automatic stay?
A creditor can ask the automatic stay to be lifted by the bankruptcy court. This usually happens if the creditor can show that they’re losing money and provide no financial harm or benefit to other creditors by lifting the automatic stay. The debtor can oppose the motion filed by the creditor for lifting the automatic stay. If you are behind your mortgage payments and there isn’t enough equity in the property to pay other creditors, the court might side with the lender in this case. There can be other reasons for the creditor to file a motion to lift the automatic stay. Since legal matters are quite complex, understanding them enough to comprehend bankruptcy filing is difficult for a layman. It is important that you consult experienced bankruptcy lawyers 2 way all your options. Call 888-297-6203 to know how bankruptcy lawyers in Dallas can help you.