Bankruptcy and the Automatic Stay: Stop These Actions Immediately!

Do you struggle with the threat of foreclosure, repossession, or eviction? Are you facing wage garnishment, mounting medical bills, overwhelming credit card debt, or other financial problems? Did you know that the  bankruptcy process includes something called an automatic stay which can stop most collection activities and civil lawsuits for a period of time, and give you some much needed breathing room?

The Sacks and Sacks Law Firm has helped many clients in Jacksonville, Florida put a stop to creditor phone calls and letters, providing debt relief and some time to formulate a plan moving forward. Once the bankruptcy petition is filed everything is paused, including creditor collection activities, until the judge can review your full financial situation.

The automatic stay that a Jacksonville, Florida bankruptcy provides can put a stop to:

  • Wage garnishment
  • Eviction
  • Foreclosure
  • Repossession
  • Bank account garnishment
  • Collection phone calls
  • Threatening letters from creditors
  • Utility disconnections
  • Public benefit overpayment collections

A creditor is typically barred from moving forward with any collection or debt activity as soon as they are informed of the bankruptcy petition filing. The automatic stay gives you time to figure out what your options are, and it pauses all civil lawsuits and collection activities unless the bankruptcy court specifically permits it.

There are Some Things the Automatic Stay can NOT Prevent!

While the automatic stay offered in bankruptcy can prevent or stop a lot of different actions and activities there are some situations where this will not help you at all. A bankruptcy filing in Jacksonville, Florida, can provide considerable debt relief, and most types of debts can be discharged once your case is finished.

There are some debts that will not be eliminated regardless of the chapter of the bankruptcy code used for your case, and some actions that are not necessarily prohibited by the automatic stay. In addition there are situations where the pause allowed will not take effect without court approval. You need an experienced and knowledgeable bankruptcy attorney to guide you, because this legal area is very complicated and full of potential pitfalls and common mistakes.

There are a number of situations where the automatic stay does not normally apply. These include:

  • Pension Loans– Payments for certain pension loans, including those from many IRAs and employment related pension plans, can be withheld from income that you make in spite of the automatic stay.
  • Many Tax Actions and Activities– If you need debt relief from the IRS this is more serious than credit card debt or past due medical bills, or even a foreclosure or wage garnishment. The automatic stay will stop the IRS from seizing any property or income that you have on a temporary basis, or issuing a tax lien for a short time. The IRS can still issue a tax assessment and demand payment for said assessment, audit you, demand that you file a tax return, and even issue a notice for tax deficiency. The temporary automatic stay is used to determine whether you will have this debt discharged in a chapter 7 bankruptcy or pay this debt under a chapter 13 bankruptcy, or if the debt will be resolved another way according to the court.
  • Filing Bankruptcy Multiple Times– During the past year if you have had a bankruptcy case that was pending then the automatic stay in your case will end after the initial 30 days from your petition filing unless a motion to continue the stay is requested by you, a creditor, or the bankruptcy trustee or the US Trustee, and the court grants this motion because it is proven that your current case was filed in good faith. If your previous case involved a creditor motion to lift the automatic stay of bankruptcy then you will need to overcome the court’s presumption that you acted in bad faith in order to have the stay continued in your new case.
  • Criminal Actions and Proceedings– Any criminal proceeding or action that you are subject to will not be stopped with the automatic stay provided by filing for bankruptcy protection. As an example: if you were convicted by a court of disorderly conduct or disturbing the peace, and as a result you were given a sentence of community service and a monetary fine, then you will have to perform your community service and pay the fine ordered in the case. The automatic stay will not stop these debts and obligations.
  • Paternity, Child Support, and Alimony Actions and Obligations– Any lawsuit naming you as a defendant in order to establish paternity, child support, or alimony, or to modify or collect the same, will not be stopped by the automatic stay that bankruptcy offers.

Can A Creditor Resume Collections in Spite of the Automatic Stay?

If you need debt relief because of wage garnishment, medical bills, eviction, foreclosure, repossession, credit card debt, or other financial problems then the automatic stay that bankruptcy can provide can help give you time to think.

One of the most common questions we hear at the Sacks and Sacks Law Firm in Jacksonville, Florida, is whether a creditor can resume collection actions while you are in bankruptcy, and the answer is yes but only if the creditor gets the approval of the court to do this.

Any creditor who resumes collection activities without court permission can face fines, penalties, and possibly other sanctions from the bankruptcy court. In order to have the automatic stay lifted the creditor must file a motion requesting the court to allow it. Normally this type of motion is filed because of a foreclosure actions, an eviction or landlord/tenant dispute, or with lawsuits that involve other courts outside of the bankruptcy.

The bankruptcy court will review any motion to lift the automatic stay very carefully. These motions are not rubber stamped, and the situation of the creditor and the individual or business filing for bankruptcy protection is evaluated before the judge makes a decision on whether to lift the stay or not.

The judge will also consider all of the other creditors in the case, making sure that one creditor does not benefit to the detriment of the others. This motion is not usually filed for medical bills, credit card debts, or other unsecured debts.

In order to have the stay lifted the creditor must prove to the bankruptcy court that allowing the stay to continue will cause financial loss for the filer of the motion, and that lifting the stay will not cause any other creditors in the case to benefit or be harmed.

At Sacks and Sacks Law Firm we have been helping clients find debt relief through bankruptcy for more than 2 decades. The automatic stay can protect you from collection activities because of medical bills, credit card debt, utility disconnections, foreclosure, eviction, repossession, and other financial problems. It is possible for your creditors to file a motion to have the automatic stay lifted, although this will be carefully considered before the judge makes a decision.

You need someone on your side, someone who knows the ins and outs of the bankruptcy process and courts, if you want to get the debt relief that you need and the fresh financial start that you deserve. Call the Sacks and Sacks Law Firm today for a free consultation and find out just how bright your financial future can be.

Sources:

Cara O’Neill, “ How Bankruptcy Stops Your Creditors: The Automatic Stay.” Nolo.com https://www.nolo.com/legal-encyclopedia/how-bankruptcy-stops-creditors-automatic-29723.html Accessed 11 May 2020.

Cara O’Neill, “ What Bankruptcy Can and Cannot Do.” Nolo.com https://www.nolo.com/legal-encyclopedia/chapter-7-13-bankruptcy-limits-benefits-30025.html Accessed 11 May 2020.

“11 U.S. Code § 362.Automatic stay.” Cornell Law School. https://www.law.cornell.edu/uscode/text/11/362 Accessed 11 May 2020.