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An Automatic Stay Can Stop Creditors from Calling You – But There Are Limits to What it Can Do

The main advantage of declaring bankruptcy is debt relief, but there are some additional advantages as well. One of the most significant is the automatic stay, which functions as a temporary injunction to stop all legal measures taken against you during the bankruptcy. It would be highly beneficial for planning purposes to understand which actions can and cannot be delayed by an automatic stay.

Keep reading to learn what it can do and what it cannot do. Then contact The Law Offices of Paul Y. Lee at 951-755-1000 to request a free bankruptcy consultation and learn if this is the right option for you.

Actions an automatic stay can stop

Utility shutoffs. An automatic stay will stop the automatic shutoff of your gas, water, or electricity for at least 20 days, and maybe longer if there is a safety concern.

Foreclosures. Many people value the defense provided by an automatic stay against foreclosure. For the most part, Chapter 13 bankruptcy must be filed instead of Chapter 7 bankruptcy in order to maximize the foreclosure protection and save the home.

Eviction: An automatic stay will often assist in preventing an eviction, unless you already have a judgment entered against you. However, if your landlord makes a claim that you are threatening the property or doing something illegal there, they may be able to convince the courts to release the stay sooner rather than later.

Collections: As soon as you file for bankruptcy, debt collectors who have bought various unsecured debts must stop contacting you and suspend their collection efforts. The automatic stay will also cover any collection actions made by a public benefits organization if you received an overpayment from them.

Wage garnishments: If your wages are being withheld in order to satisfy a debt, the automatic stay will typically stop this action and allow you to take your entire paycheck home.

Actions an automatic stay cannot stop

Certain tax actions. While an automatic stay is in place, the IRS can still audit taxpayers, send deficiency warnings, and request tax returns. However, it cannot seize property or income.

Support actions: Your bankruptcy filing won’t prevent someone from obtaining a court order forcing you to pay alimony or child support.

Pension loan repayments: It’s very possible that the automatic stay won’t prevent wage garnishments intended to pay back any money you borrowed from a pension or an IRA tied to your place of employment.

Automatic stay restrictions

According to the legislation, there are certain situations where creditors might ask the court to remove or lift the automatic stay. One typical scenario is when someone applies for bankruptcy to halt a foreclosure even though they will not be able to maintain the property after the bankruptcy. Since the stay is merely postponing the inevitable in this situation, the lender would probably have no trouble getting it withdrawn.

The fact that the term of the automatic stay shortens with each filing you make within a year is another crucial restriction to be aware of. If your initial application was denied and you subsequently reapply, the 30-day stay (with the chance to request an extension) will only be provided if your second application is approved. No length of stay will be automatically imposed if you submit three times within a year; you must actively petition for a 30-day stay in order to get one.

Please get in touch with The Law Offices of Paul Y. Lee at 951-755-1000 right away if you have any issues regarding automatic stays or bankruptcy filing.