In bankruptcy, an injunction called an automatic stay is issued at the time of filing, and it stops all collection activity. Under an automatic stay, creditors cannot send letters, make collection calls, sue the debtor, garnish their wages, repossess their property or foreclose on a mortgage. The stay does not absolve a debtor of liability, it only stops debt collection procedures until the case ends or the stay lifts.
The Length of an Automatic Stay
If a debtor is declaring bankruptcy for the first time, the stay will hold until the case is over. However, if they have filed during the preceding year, it only lasts for thirty days. Debtors filing multiple (more than two) bankruptcies during the last year will not get a stay unless it’s ordered by the court.
Which Actions are Subject to an Automatic Stay?
There are a few exceptions to an automatic stay. Some actions cannot be stopped, such as:
- Criminal cases
- Establishment, collection or modification of spousal support or child support
- Paternity suits
- Tax audits
- Debts held jointly with another party
What Happens if a Creditor Attempts to Collect During a Stay?
If a creditor makes a collection attempt after the court grants an automatic stay, they can be held in contempt of court. Here, the creditor will be forced to stop all collection attempts, they may face fines, and they may have to pay you damages. Debt Relief Attorneys can help you stop illegal collection attempts.
Can Creditors get Relief From a Stay?
Some creditors can petition the court for relief from the stay, which means that they can legally pursue collection attempts. However, the stay will remain in place for all other creditors. Only secured creditors can get relief, such as banks and mortgage lenders. To obtain relief, the creditor must show just cause, and they must prove that the collateral in question isn’t an integral part of the debtor’s reorganization plan.
Hiring a Local Bankruptcy Attorney
Filing for consumer bankruptcy is a very complex process, and bankruptcy laws differ depending on the location and chapter being pursued. A bankruptcy attorney with Ledford & Wu knows the ins and outs of filing, and he or she can recommend a suitable chapter for you while filing paperwork accurately. If a creditor tries to collect during your case, Debt Relief Attorneys may be able to stop the collection efforts and get you monetary damages.