One of the powerful ways in which bankruptcy can help anyone, whether small or big, is the “automatic stay”. It is powerful medicine for curing almost all the initial problems that come with insolvency; namely, the harassing phone calls, the constant threats of creditors, and the potential to lose all your assets and property.
Unfortunately, if a person falls behind on their payments, a creditor will try to repossess or foreclose rather than work out some repayment plan because the creditor just wants to be paid. With few exceptions, they have little concern for your life, the issues in your life, or what might have caused you to miss several payments. The bankruptcy code has provisions which are expressly there to relieve the stress of being behind on bills and helping to reorganize your life.
When a bankruptcy is formally filed, under section 362 of the bankruptcy code, an automatic stay kicks in which prohibits any creditor’s attempt to continue to collect from the debtor, the debtor’s property, or a trust. This automatic stay is very, very broad.
This automatic stay can halt judicial proceedings to collect debt, collection of a judicial judgment, any effort to exert power of property of a debtor (including repossession), attempts to put in place or enforce a lien, and can even stall national or state tax collections. It must be noted that the automatic stay only stops anything that is related to debt, and there are exceptions like domestic support obligations (child support and alimony). This automatic stay also does not apply to criminal actions, national security issues, another bankruptcy action after some time has passed, licensing, rental or leases agreements, and other more rare exceptions.
Ultimately, this means that creditors must stop trying to collect you after you have filed bankruptcy. Creditors must stop calling your or sending collection letters. They cannot sue you or try to repossess your car. Even the garnishment of wages must stop, even if they have already started to garnish your income. This automatic stay will protect you, your property, and any income from further attack from creditors. That is powerful medicine!
If that is not enough, this automatic stay can stop a foreclosure action. (Notice, to keep your home usually requires a Ch 13 bankruptcy, not a Ch 7.) The automatic stay can stop utility disconnection threats and if already disconnected, can require turning back on the utilities. (Notice, the usual deposit for service still applies.) The automatic stay stops repossession efforts and if a repossession occurs, the vehicle may be returned (Notice, the automatic stay can be lifted even in bankruptcy, but more on that below.) The automatic stay applies if you have been overpaid on Social Security or other public benefit overpayment and you may not have to repay these overpayments after bankruptcy is completed (unless there was fraud). The automatic stay even stops the national government itself from levying or seizing your property to satisfy delinquent tax debt. (You can still be audited, demand tax return, and assess liability and demand payment).
This automatic stay remains in place until the bankruptcy has ended and you have received a discharge or restructuring of your debts. The stay can be lifted earlier for fraud or evidence that property will be lost or potentially destroyed (like a lack of insurance). There are other exceptions where the stay might not be automatic, but this is usually where there is more than one bankruptcy within a set number of years, and these are usually rare.
If you are located in Idaho and find that you are in one of the situations above or believe you are, drop us a line to see if we can help you in your situation. The Automatic Stay may be the exact medicine you need soon. We have a competent lawyer to assist you through the process.