Chapter 7 - Solutions for a Financial Crisis

What is the Automatic Stay in Chapter 7 Bankruptcy? How Can it Help Me?

One of the most immediate-felt effects of Chapter 7 bankruptcy protection is the automatic stay provision, which prevents creditors from collecting debts from you. Under the automatic stay, creditors are not allowed to call you or send you collection letters.

Also, they cannot take or continue any legal action against you, or repossess your car or other assets. And even if a garnishment order has been issued, the automatic stay stops garnishment of your wages.

What Can I Stop with the Automatic Stay Protection?

Foreclosure: If your home is undergoing foreclosure proceedings, the automatic stay will stop the foreclosure action. Though Chapter 13 bankruptcy is the best option for stopping foreclosure of your home, a Chapter 7 bankruptcy filing will also temporarily halt foreclosure action in most cases.

Utility shut-offs: One of the worst situations you can find yourself is in to be forced to live in an apartment or house with no lights or gas. If your lights and gas have been disconnected by the utility company, the automatic stay in your bankruptcy petition will require the utility company to reconnect your home to their utilities. Sometimes the utility company will require a small deposit within a reasonable time after you file for bankruptcy relief—if you cannot provide the deposit, they may be able to turn off your lights and heat after the bankruptcy filing.

Repossession: If you have an automatic stay, creditors or repossession agents cannot take your car. However, in this case, the automatic stay is just a temporary solution. In order to keep the car on a permanent basis, you will have to reaffirm your car loan or return the car in your bankruptcy filing.

Lawsuits/Garnishments: If you file for Chapter 7 bankruptcy, your automatic stay will stop all lawsuits and wage garnishments, effective immediately from the time that you file your petition. And, on top of getting your full pay check, if your debt is dischargeable, you will likely be able to eliminate the entire outstanding debt in bankruptcy.

SSI/Food Stamps/Public Benefit Overpayments: Public assistance agencies can collect any overpayment that they may have mistakenly issued to you in the form of SSI or food stamps. If this overpayment is being collected, the automatic stay will stop that process. Also, if your debt is discharged, this overpayment debt will be eliminated, unless the government agency can prove that it arose from fraud.

Tax Levies: An automatic stay can protect you from some IRS processes, including a tax levy or property seizure, for any debt you might owe. However, the IRS still has authority to audit you, require filing of tax returns, assess a tax liability and require payment of the assessment.

What Will Not Be Stopped with the Automatic Stay in My Bankruptcy?

Criminal Proceedings: The automatic stay will not stop a criminal action from proceeding. If you are facing charges of driving under the influence, drug charges or another other criminal charge, filing bankruptcy cannot prevent the state from prosecuting you or imposing fines and court costs. On the other hand, if your criminal charge can be separated into criminal and debt liabilities, the court may be able to stop a creditor from collecting the debt. Regardless, it is a smart idea to consult a local criminal defense attorney for a consultation if you’ve been charged with a crime.

Child Support Actions: The automatic stay is not able to stop a lawsuit against you seeking to establish paternity or to establish, modify, or collect child support or maintenance.

How Long Will the Automatic Stay Remain in Effect?

If you’ve filed a Chapter 7 bankruptcy petition and received an automatic stay, it will remain in effect until:

• You complete the bankruptcy and receive a discharge;
• The bankruptcy judge lifts the stay at the request of the creditor;
• The property you wish to protect is no longer part of the bankruptcy estate.

In exceptional circumstances, the automatic stay will not be automatically granted when you file your bankruptcy case, or may require a motion from your bankruptcy lawyer to remain in effect. This most often applies to those who have filed one or more other bankruptcy cases recently. However, a bankruptcy attorney will know whether or not these restrictions might apply to your bankruptcy case.

Whatever your current financial situation and interest in Chapter 7 Bankruptcy, an experienced bankruptcy attorney can be a useful resource for advice and up-to-date information for consumers. To be put in touch with a Chapter 7 bankruptcy attorney in your area, take a moment to fill out our free online case bankruptcy case evaluation form, or simply call 1 (877) 226-6844 today!