Creditors have a variety of methods at their disposal to collect debts in the form of levies, liens, and garnishments. These processes can leave debtors feeling like unprotected divers swimming in a sea of sharks!
Thankfully, the bankruptcy code offers a proverbial shark cage to protect debtors and their property in the form of an automatic stay. It’s this protection that makes the imposition of the automatic stay, along with the discharge of debt, one of the significant advantages of filing bankruptcy.
How Does the Automatic Stay Work?
The automatic stay benefits debtors by barring the collection of secured and unsecured debts incurred prior to the filing of the bankruptcy petition.
Applied to everyday life the stay can be used to halt:
- Utility disconnections
- Home foreclosures
- Collection of overpayments of public benefits
- Wage garnishments
This protection means that you can confidently dive into the water knowing that your home, property, and income are safe from the predations of those tenacious creditors.
Are There Exceptions to the Automatic Stay?
While powerful, the automatic stay is not absolute and does not apply to a range of actions.
These actions may include:
- Certain tax proceedings
- Collection of domestic support obligations
- Criminal proceedings
- Repayments for pension loans.
How Long Does the Automatic Stay Last?
Once initiated the stay will continue for the duration of the bankruptcy; unless it is lifted by creditors or limited by the existence of multiple bankruptcy filings in the current calendar year.
For example, mortgage or car lenders can lift the stay even with very little or no equity in the property, especially if the debtor is behind on payments. It’s these pitfalls that make it even more important that our protective shark cage be soundly constructed.
For more information on how the automatic stay could benefit you, please contact Blake Goodman, P.C. for your free consultation.