The bankruptcy automatic stay or simply the “stay” from here on out, is a Court Order that becomes effective on the date of the bankruptcy filing that protects the bankruptcy filer from most creditor activity.
The following is a brief breakdown of the benefits, exceptions and other interesting bits of information related to it.
1. Collection contact must stop – Once the stay is in effect most lawsuits, calls, letters, etc. etc. must stop. Even from the IRS.
2. The stay doesn’t require the debtor to “ask” the Judge for it. It is automatic.
3. The stay remains in place during the length of the chapter 13 plan 4. The stay halts foreclosure activity – allowing the debtor a chance to propose a plan to catch up arrears.
5. The stay stops vehicle repossession and may be able to help get a car back that has already been repo’d.
6. Liens cannot be filed after the stay becomes effective 7. Debts cannot be reported to the credit reporting agency
8. Levy and Garnishment of assets in accounts and paychecks must stop 9. The debt component of a criminal proceeding will be placed on hold 10. Tax liens can’t be filed 11. Tax levy must stop 12. Co-Debtors are protected immediately from collection activity and may be permanently protected depending on how the debt is treated in the chapter 13 plan.
How Long the Stay Lasts
The stay will last until the court confirms the chapter 13 plan which replaces the stay as a protective order OR when the case is dismissed.
When the Stay Won’t Work
1. Proceedings related to child support, spousal maintenance, and visitation or custody.
2. Pension Loans – The stay doesn’t stop the withholding form the debtor’s paycheck to repay a 401k or other erisa qualified pension loan.
3. Certain tax Proceedings like an audit, issuance of a tax deficiency notice, requests for a tax return, or the chasing of a codebtor aren’t stopped.
4. Second bankruptcy filings completed within certain limited time periods.
For many Arizonans, the stay can provide some real room to breathe while a plan is developed to deal with their debt. If the Automatic Stay is truly violated, the judge may order the creditor to pay the debtor damages and his or her attorney fees.
If you are facing serious collection activity, foreclosure or tax levy, need to speak with an experienced bankruptcy attorney about your options and the benefits of the automatic stay, call (480) 839-4828.