We are often ask “what is the Automatic Stay” and what does it do? The automatic stay is the “Holy Grail” of Bankruptcy in that it is basically a Federal Injunction that stops almost any legal actions to collect a debt that someone might owe.
(a)Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of—
(1)
the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2)
the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3)
any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4)
any act to create, perfect, or enforce any lien against property of the estate;
(5)
any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;
(6)
any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
(7)
the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and
(8)
the commencement or continuation of a proceeding before the United States Tax Court concerning a tax liability of a debtor that is a corporation for a taxable period the bankruptcy court may determine or concerning the tax liability of a debtor who is an individual for a taxable period ending before the date of the order for relief under this title.
So as you can see from above, the automatic stay is indeed a very valuable tool that protects the individual in bankruptcy from most of the traditional methods of collection of debt. If your paycheck is being garnished, your home is in foreclosure, your bank account being attached, your car being subject to repossession, the automatic stay upon filing bankruptcy, stops all of these collection actions.
There are exceptions to the protection of the automatic stay as indicated below:
(b)The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as a stay—
(1)
under subsection (a) of this section, of the commencement or continuation of a criminal action or proceeding against the debtor;
(2)under subsection (a)—
(A)of the commencement or continuation of a civil action or proceeding—
(i)
for the establishment of paternity;
(ii)
for the establishment or modification of an order for domestic support obligations;
(iii)
concerning child custody or visitation;
(iv)
for the dissolution of a marriage, except to the extent that such proceeding seeks to determine the division of property that is property of the estate; or
(v)
regarding domestic violence;
(B)
of the collection of a domestic support obligation from property that is not property of the estate;
(C)
with respect to the withholding of income that is property of the estate or property of the debtor for payment of a domestic support obligation under a judicial or administrative order or a statute;
(D)
of the withholding, suspension, or restriction of a driver’s license, a professional or occupational license, or a recreational license, under State law, as specified in section 466(a)(16) of the Social Security Act;
(E)
of the reporting of overdue support owed by a parent to any consumer reporting agency as specified in section 466(a)(7) of the Social Security Act;
(F)
of the interception of a tax refund, as specified in sections 464 and 466(a)(3) of the Social Security Act or under an analogous State law; or
(G)
of the enforcement of a medical obligation, as specified under title IV of the Social Security Act;
So if you are experiencing collection efforts from your creditors that you need relief from, filing a Chapter 7 or Chapter 13 case can get you immediate relief and hopefully allow you to either discharge the obligation altogether or enter into a repayment program that you control and within your budget.
David Phillips
12/2015