According to the United States Bankruptcy Code, when a debtor file for a bankruptcy, an automatic stay order is issued that prohibits their creditors from pursuing their collection actions against the debtor. In other words, the automatic stay is a legal provision that offers a temporary protection to the debtor from being pursued the clearance of debts owed by them.
Automatic Stay In Bankruptcy
- In some cases, the debtor might not be able to keep up with their utility bill payments and get threats for disconnection by the concerned agency. An automatic stay prevents the disconnection of your electricity, gas, water, and telephone service for a period of 20 days from the filing of bankruptcy.
- If you have not been able to make your monthly mortgage payments, your bank might begin foreclosure proceedings. In such cases, an automatic stay will ensure that the bank halts the foreclosure with immediate effect.
- If you are entitled to public benefits and are overpaid, the agency has the right to collect the overpaid amount from your future payments. An automatic stay will prevent the agency from collecting the overpayments.
What are the exclusions in an automatic stay?
- The automatic stay does not offer a provision for stopping the IRS from going ahead with their tax proceedings against you. For instance, the IRS can still demand a tax return, carry out an audit, make a tax assessment, demand payment for tax assessments and so on.
- Filing for a bankruptcy would certainly not prevent a criminal proceeding against you.
- Even if an automatic stay is issued, you will still be required to repay a loan that you might have taken against your pension.
However, your creditors too have the right to ask the bankruptcy court to lift the automatic stay. For instance, if there is no way that you could keep your property and you creditor requests the court’s permission to proceed with the foreclosure, it is likely that the court will give a green light. Fight creditors with help from a professional. Our experienced Citrus Heights bankruptcy lawyers can stop creditors in their tracks.
Categorized in: Automatic Stay