What is an Automatic Stay?
When an individual makes the decision to file bankruptcy, an automatic stay will be put in place in order to immediately stop any lawsuit that may be filed against you, as well as most actions against your property by a creditor, collection agency, or a government entity.
What an Automatic Stay Does
Many consider an automatic stay to be a vital form of relief when beginning bankruptcy proceedings. There are many common situations that can be affected by an automatic stay:
- Foreclosure: If you are facing foreclosure, the automatic stay will work to temporarily stop the proceedings. However, this is not typically a permanent protection and the creditor will likely be able to proceed with its foreclosure in the future.
- Eviction: In the event that you are being evicted from your residence, the automatic stay will likely provide aid. However, there are also sections of bankruptcy law that allow for landlords to continue with eviction proceedings. Specifically, if your landlord has already received a judgment of possession against you at the time you file, an automatic stay will not affect the proceedings.
- Utility Disconnections: In a situation where you find yourself behind on a utility bill and the utility company is threatening to turn off service, an automatic stay will likely prevent the disconnection for a set number of days.
- Collection of Overpayments of Public Benefits: Under circumstances involving a person being overpaid, the agency involved is normally permitted to collect this overpayment by taking it out of your future checks. An automatic stay, however, will prevent the agency from doing this. Take note that if you become ineligible for the benefit, an automatic stay will not prevent the termination of benefits.
- Multiple Wage Garnishments: When an individual files for bankruptcy, the automatic stay will stop any wage garnishments that may be currently in place.
What an Automatic Stay Does Not Do
While it is true that an automatic stay will provide for many forms of relief, it will not protect an individual in all situations. Some examples of circumstances not within the scope of the automatic stay include:
- Certain Tax Proceedings: Even after filing for bankruptcy, the IRS can still perform audits, issue tax deficiency notices, demand a tax return, issue tax assessments, or demand payment of an assessment.
- Support Actions: Filing for bankruptcy will not prevent lawsuits involving paternity, child support, or alimony.
- Criminal Proceedings: In this case, a criminal proceeding may be reviewed and separated into criminal and debt components. The criminal component will not be stopped by an automatic stay.
- Loans from a Pension: Even with the implementation of an automatic stay, funds can be withheld from an individual’s income in order to repay a loan from certain types of pensions.
Furthermore, automatic stays are not always guaranteed in all situations and a creditor may be able to get the automatic stay removed.
If you having questions related to bankruptcy law and the various types of bankruptcy, contact the attorneys at 702 Defense today.