How Does Bankruptcy Automatic Stay Work?
If you live in New York, and you are being harassed by creditors or collection agencies, the automatic stay part of the bankruptcy process may give you room to breathe.
What is an Automatic Stay?
Under Section 362 of the United States Bankruptcy Code https://www.usbankruptcycode.org/, as soon as you declare bankruptcy, and your paperwork is submitted to the court, an automatic stay kicks in. This prevents most people and companies from trying collect the money you owe them. Most debtors and bill collectors must immediately stop trying to call, write, or email you. Let’s look at what an automatic stay does and doesn’t cover.
An Automatic Stay Can…
- Slow down evictions – an automatic stay can temporarily stop an eviction, giving you additional time to try and pay down your back rent or to find a new place to live. However, this doesn’t cover all eviction proceedings, which we’ll cover in the next section.
- Avoid foreclosures – an automatic stay will immediately stop all foreclosure actions.
- A Chapter 7 https://www.ny-bankruptcy.com/services/bankruptcy-solutions/bankruptcy-chapter-7/ bankruptcy case will also give you time to resolve your mortgage payments and give you an additional few weeks to live at the property and/or to find a new place to live.
- A Chapter 13 https://www.ny-bankruptcy.com/services/bankruptcy-solutions/bankruptcy-chapter-13/ or 11 bankruptcy case can give time to work out a plan to reduce and reorganize your debt – for Chapter 13, this can up to a five year plan; over five years for Chapter 11.
- Keep your utility services – if you are behind on your utility (landline telephone, gas, electric, water) bills, an automatic stay will prevent your utilities from being shut off for a few extra weeks. A one to two month security deposit may be required. Note – cell phones and broadband (internet and TV) are not considered utilities.
- Stop certain wage garnishments or bank restraints – if part of your pay check is being diverted to pay off certain commercial debts (i.e., credit cards), your employer will need to immediately stop the payment. Also, if your bank account is restrained by a creditor, you can release it upon the filing of a bankruptcy case.
- Temporarily halt car repossession – if your bank is threatening to repossess your car, an automatic stay can give you a few extra weeks to either negotiate with your lender or to find alternate means of transportation.
The Limits of an Automatic Stay
- Cannot stop all evictions – an automatic stay won’t apply if:
- the eviction proceeding resulted in a warrant of eviction issued before you declared bankruptcy
- the landlord can prove you are breaking the law or the lease (damaging the property, dangerous behavior, selling drugs from your apartment, etc…)
- Cannot stop the IRS – if you are being audited, or the IRS demands fiduciary payroll or sales taxes owed due to alleged improper actions or alleged tax fraud.
- Cannot stop family court charges – child and spousal support aren’t covered. If your wages are garnished to pay these costs, they will continue to be.
- An automatic stay may also not be allowed if you’ve declared bankruptcy multiple times in a year.
If one of your loans has a co-signer (a co-debtor) – In Chapter 13 cases, the automatic stay will be extended to the co-debtor if they are an individual. This does not cover all debts and your co-debtor may still be held accountable.
Why You Need a Bankruptcy Attorney by Your Side
While an automatic stay can sound like the answer to prayer when it comes to being hassled by debt collectors, be aware that your creditors can fight back. They can ask the court to modifying or lift the automatic stay, giving them the ability to once again demand repayment.
Your creditors that are deterred by the automatic stay can file a case in bankruptcy court where they must meet certain standards:
- Your property is not necessary for an effective reorganization
- There is no or little equity in the property compared to what is owed by the debtor and/or against the property
- The lifting of the stay will not harm the debtor or other creditors
Also, if the court feels that you are committing fraud or you are not paying your bills when you could, the automatic stay could be revoked. In any case, there are usually a number of hearings involved and you don’t want to go through this all alone. This is where the right bankruptcy attorney can make all the difference.
Reaching Out for Help
If you live in New York, and you’d like to talk directly to someone who specializes in creative, case-specific, out of the box, legal solutions to help guide you effectively through the bankruptcy process, reach out to New York bankruptcy lawyer Ronald D. Weiss, P.C. for a free consultation. He can walk you through the process of getting the help you need. Call 631-271-3737 and take the first step to a fresh start.
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