Understanding Automatic Stays in Chapter 7 & Chapter 13 Bankruptcy

When you file for Chapter 7 or Chapter 13 bankruptcy, an automatic stay is enacted immediately after filing. An automatic stay prohibits collectors and creditors from contacting you and requesting payment for past-due bills. Federal bankruptcy laws dictate that when an automatic stay is in place, all actions regarding collections must be stopped. Automatic stays protect you from several collection actions and allow you to work with your bankruptcy lawyer and trustee (if applicable) to develop a plan to manage your debts once the bankruptcy is finalized. Learn more about automatic stays when filing for Chapter 7 and Chapter 13 bankruptcy below.

How Automatic Stays Work

The rules regarding automatic stays are detailed in Section 362 of the Federal Bankruptcy Code. It’s a federal regulation that must be followed throughout the U.S., regardless of where you and the creditor are located. Automatic stays go into effect immediately after filing for bankruptcy and legally prevent creditors from contacting you or attempting to get you to make payments. Automatic stays are available for Chapter 7 and Chapter 13 bankruptcy, which accounts for almost all bankruptcy filings. When you file for bankruptcy, the creditors you list when you file will be notified of the automatic stay and the bankruptcy proceeding.

Protections Automatic Stays Provide for Chapter 7 and Chapter 13 Bankruptcy

Automatic stays prevent nearly all actions a creditor may take to settle your debts with them. Here are some of the actions having an automatic stay prevents you from:

Creditor Calls

Creditors legally cannot contact you when an automatic stay is in place. They shouldn’t call you, send you an invoice in the mail, email, or text you. All communication should go through your bankruptcy attorney.

Wage Garnishment

Certain wage garnishment actions will be halted with an automatic stay in place.

Foreclosure and Evictions

Once you file for bankruptcy, foreclosure proceedings initiated by mortgage lenders or lien holders are put on hold temporarily while bankruptcy proceedings occur. In most cases, landlords are also not allowed to evict you from your home.

Repossessions

Creditors can’t repossess your property, like cars or boats, to satisfy debts if an automatic stay is in place.

Utility Disconnections

Disconnection orders for services like electricity, water, and gas will be postponed for at least 20 days after an automatic stay is put in place.

Pending Lawsuits

If you’re currently being sued for damages by someone, filing for bankruptcy and having an automatic stay in place can halt the final judgment.

How Long Do Automatic Stays Last?

An automatic stay is in effect from the time you file for bankruptcy until it’s discharged. For Chapter 7 bankruptcy, proceedings usually take three to six months to complete. Chapter 13 bankruptcy filings can take longer to conclude, anywhere from one to several years. If you’ve filed for bankruptcy before, a judge may shorten the automatic stay period.

Can Creditors Contact Me During an Automatic Stay?

No, creditors cannot contact you when an automatic stay is in place. Automatic stays for Chapter 7 and Chapter 13 bankruptcy prevent creditors from contacting you or attempting to receive payments to settle debts while bankruptcy proceedings occur. Your creditors cannot call you, send you bills or notices, or try to collect payment.

What Happens if a Creditor Violates an Automatic Stay?

If a creditor violates the automatic stay order, you can file a motion for sanctions against the creditor. The creditor may be ordered to pay a fine, punitive damages, and attorney’s fees. A creditor action would be considered “willful” if evidence suggests they were notified of the automatic stay but contacted you for payment anyway.

Can Automatic Stays be Lifted?

In some instances, creditors can submit a request (called a motion for relief) to have the automatic stay lifted. Judges may grant or deny the request on a case-by-case basis.

What Debts Are Exempt from Automatic Stays?

Automatic stays for Chapter 7 and Chapter 13 bankruptcy only apply to certain types of debts. Here are the debts that can still be collected even if an automatic stay is in place:

  • Criminal proceedings. If you’ve been charged with a crime and have been sentenced to pay a penalty or fine, you’re still obligated to pay.
  • Support actions, such as child support or spousal support (alimony) payments, are exempt from the protection an automatic stay provides.
  • Tax bills. Even if you file for bankruptcy, you must still pay your taxes.

File Bankruptcy With a Trusted Orlando Bankruptcy Attorney

Filing for bankruptcy is a complex process with many rules and regulations. Have an Orlando bankruptcy attorney like our team at the Badgley Law Firm at your side to help you get financial relief and help you navigate the process of automatic stays for Chapter 7 and Chapter 13 bankruptcy. We offer free consultations to discuss your case. Call us at 407-781-0420 or email us to get started.

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