Does the Automatic Stay Always Apply in Bankruptcy Cases?

As soon as you file for bankruptcy protection — as an individual or a business — you will receive immediate help from an injunction known as the “automatic stay,” set forth in Section 362 of the US Bankruptcy Code. In every bankruptcy case, whether it is a liquidation or reorganization bankruptcy, and whether the debtor is an individual or a business, the automatic stay is likely to be applicable to the case. So, in general, the automatic stay always does apply across bankruptcy cases, yet it can be lifted in certain circumstances that will depend on the facts of the case. Our experienced West Palm Beach bankruptcy attorneys can explain in more detail.

Understanding the Automatic Stay 

The automatic stay is an injunction that nearly every debtor can expect to be imposed against their creditors once a bankruptcy petition is filed. The function of the automatic stay is to stop creditors and debt collectors from continuing to take any action against the debtor or to initiate any new actions to recover debt owed by the bankruptcy filer.

Accordingly, once the automatic stay applies to a case, a creditor or debt collector cannot move forward on any legal debt-collection actions such as a lawsuit or wage garnishment — either a new action or an existing one. The automatic stay also stops foreclosure proceedings. In addition, the automatic stay prevents secured property from being repossessed, and it also prevents creditors or debt collectors from continuing to make contact.

At the outset of a bankruptcy case, debtors of all types and in various types of bankruptcy filings can usually expect the automatic stay to apply. However, it is possible under certain circumstances for a creditor to seek relief from the automatic stay — in other words, to have the automatic stay lifted for them.

When a Creditor Seeks Relief from the Automatic Stay 

Although the automatic stay is likely to prevent any debt collection actions against you or your business initially, you should know that a creditor can seek relief from the automatic stay. By seeking relief from the automatic stay, a creditor is asking the bankruptcy court to partially lift the automatic stay as it applies to them. If a creditor is successful, the automatic stay would still apply to other creditors and debt collectors, but the creditor that successfully obtains relief from the automatic stay will no longer be barred from debt collection actions and can continue to take action against a debtor.

If you are concerned about the automatic stay being lifted for a particular creditor or set of creditors, you should know that there is a legal process any creditor must follow in order for this to happen. The creditor must file a motion for relief from the automatic stay, and the bankruptcy court will review the motion. The court can then deny the motion, lift the automatic stay for the creditor, or modify the automatic stay.

Contact a West Palm Beach Bankruptcy Attorney Today 

Do you have questions about filing for bankruptcy in general, or do you have specific inquiries about the automatic stay and its applicability to your case? One of the experienced West Palm Beach bankruptcy lawyers at Kelley, Kaplan & Eller can speak with you today to learn more about your circumstances and to provide you with answers to questions you may have about individual or business bankruptcy filings in South Florida.

Source:

law.cornell.edu/uscode/text/11