When a person files for Chapter 7 or Chapter 13 bankruptcy, they are afforded relief from creditor communications and collection efforts through a court injunction known as an “automatic stay.” An automatic stay can provide individuals with protection against bill collectors, allowing them much needed breathing room to reorganize their finances.
An automatic stay can protect against the following debt-related emergencies:
- Utility disconnections: If you are behind on your gas, water, electric, or telephone bill, an automatic stay can delay their disconnection for a minimum of 20 days.
- Eviction: An automatic stay can halt eviction proceedings unless your landlord already has a judgment of possession against you at the time you file for bankruptcy. Automatic stay can also be overridden if your landlord alleges that you have been endangering the property or using illicit drugs on its premises.
- Foreclosure: Bank foreclosures are also stopped by automatic stay, but only temporarily. If you are facing a foreclosure, Chapter 13 bankruptcy will be the best remedy that will allow you to keep your house, whereas Chapter 7 bankruptcy will likely result in the forced selling of your home to satisfy your creditors.
- Collection of overpaid public benefits: If you were overpaid public benefits, an automatic stay will prevent the agency from collecting this overpayment out of your future checks. It is important to note, however, that the agency still maintains the right to deny or terminate your benefits in the event that you should become ineligible.
With that being said, there are certain things that an automatic stay cannot prevent. An automatic stay cannot prevent you from being audited or contacted by the IRS for unpaid tax debts, though it will protect you against tax liens or wage garnishments. Unpaid child support or alimony obligations are also unaffected by automatic stay. In the event that you should be facing criminal charges such as fraud over your debts, criminal proceedings will still commence.
Can Creditors Get Around an Automatic Stay?
In certain circumstances, creditors can petition with the bankruptcy court to lift an automatic stay or grant them an exception to the injunction if it is not serving its intended purpose or if it jeopardizes the creditor’s interest in certain property. For example, if you were to file for bankruptcy the day before your house was to be sold in foreclosure and you have no reasonable means of keeping your property, the courts would likely grant the bank an exemption from the automatic stay.
If you are struggling with credit cards or medical debt, the New York Debt Lawyers at the Law Office of Simon Goldenberg, PLLC can guide you through your options. Filing for bankruptcy in brooklyn could help get you on the road towards a debt-free future. Having earned a Superb Avvo Rating and a three-time Super Lawyers® for our unmatched advocacy, we have what it takes to get you through this difficult time.
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