How Will the Automatic Stay Protect Me in a Bankruptcy Case?
When an individual files for personal bankruptcy in South Florida, the automatic stay will provide a number of important protections against additional debt collection actions. The specific benefits of the automatic stay — and how it will apply to your bankruptcy case in particular — will depend on the nature of your current debts and whether you will be filing for Chapter 7 or Chapter 13 bankruptcy. If you have any questions, it is important to seek legal advice. In the meantime, our West Palm Beach bankruptcy attorneys can provide you with more information that can give you a general idea of how the automatic stay can protect you once you file for bankruptcy.
Understanding the Automatic Stay
To understand how the automatic stay will protect you, it is important to be clear about what the automatic stay is and what its function is in a US bankruptcy case. In short, the automatic stay is an injunction, and it prohibits a debtor’s creditors from continuing to take actions designed to collect debt. The automatic stay is a broad injunction that enjoins creditors from taking the following types of actions against debtors who have filed for bankruptcy:
- Contacting a debtor to seek payment;
- Filing a lawsuit against the debtor to recover debt;
- Taking any additional action in a previously filed lawsuit designed to collect from a debtor;
- Attempting to garnish wages; and
- Moving forward with any foreclosure actions.
Immediately Stopping Actions to Collect Debt
As we explained above, the key overarching protection of the automatic stay is that it immediately stops all actions to collect debt. The specific types of debt collection actions that will be halted against you will depend on your circumstances. For example, if a creditor recently filed a lawsuit against you, all actions in that lawsuit will have to stop. Or, if a mortgage lender has initiated a foreclosure, no additional foreclosure actions can occur during your bankruptcy case. And for all debtors, the automatic stay should stop all contact from creditors — via phone, text message, email, and other means.
It is important to be aware that a creditor can ask the court to lift the automatic stay so that the creditor can move forward with a collection action (usually in the case of a secured creditor), but this request must go through the bankruptcy court first.
Differences in Chapter 7 and Chapter 13 Cases
The automatic stay can have different long-term protections for certain debtors, depending on whether the debtor is filing for Chapter 7 or Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, the automatic stay is essentially designed to stop collection actions on debt that will ultimately be discharged in the bankruptcy case. Yet in a Chapter 13 case, the automatic stay can ultimately allow a debtor to keep secured property when they are behind on payments, including their homes and automobiles.
In a Chapter 13 case, the automatic stay stops collection actions and gives the debtor an opportunity to catch up on past-due mortgage debt (and other types of secured debt) so that they can ultimately get back on track with the creditor and retain their property. In the case of a home and a foreclosure, the automatic stay is particularly crucial — it can stop a foreclosure and give the debtor an opportunity to remain permanently in their home.
Contact a West Palm Beach Bankruptcy Attorney Today
Do you have questions about the automatic stay? One of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller can help you today.
Sources:
americanbar.org/groups/gpsolo/resources/ereport/archive/automatic-stay-bankruptcy-overview/
law.cornell.edu/uscode/text/11
