What is the Bankruptcy Automatic Stay?
Denton County Attorneys Explain the Immediate Benefits of Bankruptcy
For many, the benefits of bankruptcy start as soon as you file, with the automatic stay issued by the court. This order puts a stop to all collection actions from your creditors, ends wage garnishments and can save your home from the foreclosure process. This means that you will get immediate relief from the stress of harassing calls and letters. You can also usually stay in your home throughout the bankruptcy process, even if foreclosure proceedings have already begun. Though there are ways that your creditors can lift the bankruptcy automatic stay, it most often remains in effect until the end of proceedings and the discharge of your eligible debts.
Filing for bankruptcy can have many benefits, including allowing you to reclaim control of your financial future. The automatic stay will end collection harassment, stop foreclosure and, perhaps most importantly, restore your peace of mind. Denton County bankruptcy attorney David Shuster has been providing debt relief solutions to Texas residents for over a decade. In a free initial consultation, he can review your situation, answer your questions and explain the details of the bankruptcy process. We accept cases throughout North Texas, including those from Dallas County and Tarrant County.
What Does the Automatic Stay Do?
As soon as you file for bankruptcy, the court issues an automatic stay to all your creditors. As the name suggests, this happens automatically, without the need of a hearing, trial or judgment. This notice should put an immediate stop to:
- Collection actions. This means that you will not receive any harassing phone calls or letters for the duration of your bankruptcy.
- Wage garnishments. You should receive full pay throughout your bankruptcy.
- Foreclosure proceedings. Even if the bank or mortgage lender has already begun foreclosing on your property, the automatic stay will freeze this process. You can often use the bankruptcy process to get current on your mortgage and save your house permanently.
- Repossessions. You can keep property, such as a car, throughout the bankruptcy process. You may be able to pay off what you owe on this property through bankruptcy as well.
- Creation of new property liens. Once the automatic stay is in effect, your creditors cannot secure your debt with a new lien.
- Overdue utility bill penalties. If you are behind on your utility bills, your water, gas and/or power may be shut off. The automatic stay prevents this from happening. Additionally, your utilities must be restored if they were previously cut off.
There are, however, limits to the power of the bankruptcy automatic stay. While this notice will stop most actions against you, it cannot end:
- Some tax proceedings. The automatic stay will end IRS collection actions and prevent the creation of a tax lien. However, the Internal Revenue Service can still audit you as well as assess your tax debt and/or order a tax return, if previously unfiled.
- Child and/or spousal support payments. You cannot discharge overdue child or spousal support payments, and you must continue payments throughout bankruptcy.
How Long Does the Bankruptcy Automatic Stay Last?
Typically, the automatic stay remains in effect throughout the bankruptcy process. If you file Chapter 7 bankruptcy, this usually means between four and six months. For Chapter 13 bankruptcy, the automatic stay will last from three to five years. During that time, you will either liquidate your nonexempt assets or complete a Chapter 13 repayment plan. Then, any remaining unsecured debt will be discharged and the stay will be lifted. If you still owe certain debts after bankruptcy, such as back taxes, your remaining creditors can begin collection actions again.
Additionally, in some rare cases, the automatic stay can be lifted early. If you are filing for bankruptcy for the second time within a year of a previous case, the automatic stay will only last 30 days. However, if you file in good faith, then you, the bankruptcy trustee or your bankruptcy attorney can petition the court to extend the order for the duration of the bankruptcy process.
Even if this is your first bankruptcy filing, your creditors can sometimes remove the automatic stay by filing a petition. However, a creditor cannot file such a petition without reason. For example, if you miss payments on ongoing secured debts, like your mortgage, during bankruptcy, your lender may have cause to ask for relief from the automatic stay. Additionally, some creditors may claim they do not have adequate protection on secured debts. Still, these occurrences are rare. If you have any concerns about your creditors and the automatic stay, your bankruptcy attorney can help.
Confused about the Automatic Stay? Call Our Denton County Bankruptcy Attorney
An automatic stay is just one of the many benefits of bankruptcy. At Shuster Law Firm PLLC, bankruptcy attorney David Shuster focuses the bulk of his practice on helping those struggling with unmanageable debt. He can give you details about the automatic stay as well as explain exactly how it can benefit your unique situation.
Contact our law firm online or call our office in Lewisville to schedule your free consultation. We also have an office location in Dallas County and assist residents across North Texas, including the Dallas-Fort Worth Metroplex, with a wide range of legal issues.