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The Automatic Stay Rule

The Automatic Stay is a provision within U.S. bankruptcy laws that protects debtors from ongoing collection efforts, home foreclosure, car or truck repossession, and other forms of debt collector activity.

The full details of the Automatic Stay are fairly complex but can be explained to you by your bankruptcy lawyer. The first thing to know is that the Automatic Stay goes into effect immediately when you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy protection.

There are some exceptions to the Automatic Stay. Examples of actions that the Automatic Stay cannot stop are child support or divorce support collections, most forms of IRS actions, and some eviction proceedings.

A very important thing to know is that you have a limited time to stop home foreclosure. Waiting to file bankruptcy puts you at great risk of losing your home. Act now! Call us to set an appointment with a bankruptcy lawyer.

How the Rule Serves and Protects You

Stopping Foreclosure

The Automatic Stay gives you much needed time to stop any intent to foreclose. Your options in how to handle the situation are different for Chapter 7 filings versus Chapter 13 filings. Before you can determine what is applicable for your situation you need to know whether you qualify for a Chapter 7 or for a Chapter 13 bankruptcy filing. This is done via a Means Test.

Stop Auto Repossession

With the Automatic Stay in effect debt collectors and creditors are blocked from repossessing your vehicle unless they get special permission from the bankruptcy court. This request is usually not granted so the Automatic Stay is a powerful tool for you. If a creditor does attempt to get special permission your bankruptcy attorney can intervene and argue to stop the motion filed by the creditor. It is wise to use the time given by the Automatic Stay to communicate with the lender and work out a plan to bring your loan payments current.

Stop Collection Efforts

When you file for bankruptcy protection your creditors will be notified. It may take up to a few weeks for any particular creditor to become aware and stop their collection efforts. When you file for bankruptcy debt relief you must list all of your creditors. From this list the clerk of the bankruptcy court will issue notifications to each listed entity. Creditors are fully aware of the Automatic Stay, and penalties for abusing credit and collections laws.
Once the bankuptcy notifications are sent, the harassing phone calls, letters and emails will stop.

Your bankruptcy lawyer will keep you advised on each step of your case and let you know about rulings on debt repayments or court ordered surrender of assets. For more information you can call our office to set an appointment with a bankruptcy lawyer in Marietta, Georgia.

When Does Protection Begin?

As soon as you file your bankruptcy papers (petition) all provisions start. Your creditors will be notified that you have filed for bankruptcy protection. They understand what this means, and should cease all collections efforts. If any creditors continue to contact you, your attorney should be advised.

Applying the Rule

For Chapter 7 Filing

In a Chapter 7 bankruptcy case your personal assets are considered to be part of your bankruptcy estate. Your court-appointed trustee (bankruptcy case manager) is required to liquidate your assets to generate funds to pay off creditor claims. An Automatic Stay provides some extra time to sell your home at fair market value instead of taking a loss from foreclosure. If the home can be sold for more than the mortgage payoff your estate can realize a positive financial impact to which you may be entitled to receive some or all the windfall.

For Chapter 13 Filing

In a Chapter 13 bankruptcy, an Automatic Stay offers time for debt restructuring and blocks foreclosure on your property. A Chapter 13 bankruptcy is designed for reorganizing debt and allows you to repay your debts over three to five years (as the court decides). The court will need to find that your income is such that you have a reasonable ability to make full mortgage payments.