Although there are several benefits to filing for a Chapter 7 bankruptcy, one of the most important is an automatic stay. The stay prevents your creditors from taking legal actions against you. However, the stay does has its limitations. If you are filing for bankruptcy, here is what you need to know about the automatic stay.
What Legal Actions Does the Automatic Stay Stop?
In most instances, the automatic stay can stop collections and lawsuits from a range of creditors. For instance, the stay can stop credit card companies from taking action. It can also stop collections:
- Medical care providers, such as hospitals and doctors
- Internal Revenue Service
- Wage garnishments
- Mortgage lenders
- Car loan lenders
Your bankruptcy attorney can help assess your other debts and determine whether or not the stay will apply to them. It is important to note that some debts do come with exceptions. For instance, if you owe taxes to the IRS, the stay can stop the agency from collecting, but once the stay is lifted, the agency can continue in its efforts to collect on a tax debt.
What Does the Automatic Stay Not Cover?
Even though the automatic stay covers a large majority of debts, there are some instances in which some debt collectors are allowed to proceed. Debts, such as child support and alimony, can still be collected through various means, including wage garnishments, if necessary.
The automatic stay also cannot help if you are being evicted from your home and the final order of possession has been issued by the court. However, if you have not yet had your day in court, your landlord will have to wait for the stay to be lifted to take action.
If you have filed for bankruptcy in the past, it can have a bearing on the automatic stay. If you have had another bankruptcy filing within the last year, the stay is limited to 30 days. If you have had two or more repeated bankruptcies in the last year, there is no automatic stay.
Can the Stay Be Lifted Early?
There is a possibility that the automatic stay can be lifted early. A creditor can ask the court to remove the stay so that it can proceed with taking action. Whether or not the court agrees depends on the situation.
For instance, if the creditor claims that the asset is rapidly depreciating and it must be immediately sold to attempt to gain some proceedings from it, the court might lift the stay.
To determine exactly what is covered by the automatic stay and to learn your options for handling those debts not covered by the stay, consult with an attorney (such as one from Reppe Law Office).