What Is The Automatic Stay?
The Automatic Stay is an order issued by the federal bankruptcy court which directs that any collection action against the debtor must immediately stop. In most cases this order is issued automatically by the court clerk at the time of the filing of the bankruptcy case.
The Automatic Stay is found in 11 USC §362 of the US Bankruptcy Code.
The important thing to know is that once you file your bankruptcy case the Automatic Stay will immediately stop most debt collection activity such as:
- Wage garnishments
- Tax levies
- Foreclosure sale of a home or other property
- IRS or other tax collection efforts
- Auto repossession
- Collection letters and phone calls
Just how powerful is this provision of the bankruptcy code? So powerful that even the IRS must obey it! It literally stops creditors dead in their tracks.
The Exceptions To The Automatic Stay
Of course, as you might expect, there are exceptions to the Automatic Stay. But these exceptions are reasonable and won’t deter the normal debtor. For example, actions not affected by the Automatic Stay include such items as:
- Domestic support orders
- Child support orders
- Actions to establish paternity
- Actions to modify an order for domestic support obligations
- Actions to modify child custody or visitation
- An action to dissolve a marriage (except for the division of property)
- Criminal proceedings
- The suspension or restriction of a driver’s license understate law to enforce the payment of a domestic support obligation
The Purpose Of The Automatic Stay
The purpose of the Automatic Stay is to give the debtor some breathing room to get their finances back in order. This can give the debtor a second chance to keep their home and protect their income.
How long does the Automatic stay last?
First, in rare cases a bankruptcy may not have the provisions of the Automatic Stay attached to it. For example, if a person files 3 bankruptcy cases in a year they do not have the privileges of the automatic stay. If you have recently filed a bankruptcy that was dismissed, be sure to tell your attorney and he will explain it to you.
Second, a creditor can petition the bankruptcy court to remove the the automatic stay so that they can get their property. In this case the creditor must file a motion and set a hearing date. The creditor must show the court that he has some interest in the property such as a mortgage lien or an auto lien. Further, the creditor must show the court that you have been given notice of the hearing date and a chance to defend yourself.
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Third, the Automatic stay – which is a temporary order – ends at the debtor’s discharge. At that time it is merged into the Discharge of Debtor which is a permanent injunction against the creditor forbidding them from trying to take any action to collect the debt.
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