02 Jun Bankruptcy Basics: What Is An Automatic Stay?
When a person files for bankruptcy relief by filing a petition under either Chapter 7 or Chapter 13 of the United States Bankruptcy Code, the Code provides that immediately an automatic stay is put into place. What on earth is that? Well, an automatic stay means that no one has to do anything to make it happen. The Code makes this stay happen. The stay? This is not the kind of “stay” that you tell your dog. This “stay” is that creditors, the people you owe money to, can no longer collect or even attempt to collect any money (or property) from you, without getting permission from the bankruptcy judge. The stay is a big, big protection for people who file bankruptcy. Wage garnishments must stop. Foreclosures must stop. Your car cannot be repossessed. Your bank account cannot be touched by a creditor. If creditors violate the stay rules, by collecting or even attempting to collect, the attorney representing you will want to know immediately. Telephone calls, letter writing, bills sent to you, garnishing, filing a lawsuit in state court–all these actions violate the automatic stay rules in 11 USC 362. There are just one or two very limited exceptions (like child support continuing to be paid).
If a creditor does violate the automatic stay and your attorney can prove that the creditor knew about the bankruptcy, your attorney may be able to recover damages for you, as well as the property, from that creditor. The automatic stay is probably one of the most important parts of your bankruptcy case and your attorney needs to know if creditors are contacting you. Don’t forget, a creditor must get permission from the judge before doing anything to collect while your bankruptcy case is open. The judge will not grant permission unless there is a very good reason and usually only for secured creditors to get their property back.
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