The Automatic Stay In Bankruptcy
The automatic stay is an important element in all bankruptcy proceedings. It essentially prevents most creditors from pursuing debts owed by the debtor. This means that the automatic stay prevents all harassing phone calls, letters, and any other means of contact. If you want to file for bankruptcy and have creditors harassing you, it is important to contact an experienced bankruptcy lawyer, who will help you pursue your options in bankruptcy. Contact The Law Office of Andrew M. Doktofsky, P.C., to discuss your options.
Bankruptcy Automatic Stay Information Center
- Automatic Stay Defined
- Effect of Automatic Stay
- Effect of Prior Bankruptcy Filings on the Automatic Stay
- Exceptions to the Automatic Stay
- Long Island Automatic Stay Resources
Automatic Stay Defined
According to § 362(a) of the Bankruptcy Code, an automatic stay goes into effect upon the filing of a bankruptcy petition. The automatic stay prevents creditors from pursuing most types of debt collection actions against the debtor. This means that creditors are not permitted to pursue a debtor through any of the following means:
- Phone calls
- Collection letters
- Wage garnishments/income executions
- Freezing bank accounts
The automatic stay remains in effect until the debtor receives a discharge, at which point the stay is replaced by a permanent injunction that prevents creditors from pursuing collection of all discharged debts.
If a creditor does want to pursue a debt, it must first file a motion in the Bankruptcy Court to have the automatic stay lifted. Once a creditor has filed the motion, and the court has held a hearing, relief will be granted to the creditor if:
- There is cause to terminate, annul, modify or condition the stay under 11 U.S.C. § 362(d)(1), or
- With respect to a stay of an act against property, if the debtor does not have any equity in the property and the property is not necessary to an effective reorganization.
The automatic stay goes into effect immediately when the debtor files for bankruptcy. Therefore, the debtor does not have to do anything to put the stay in place – it is automatic (with certain exceptions described below). The notice of bankruptcy filing that is sent by the Bankruptcy Court to all of the debtor’s creditors informs the creditors that an automatic stay is in effect.
There is an additional automatic stay when an individual files for bankruptcy under Chapter 13 of the Bankruptcy Code. This stay is provided for individuals who are jointly obligated on a consumer debt with the Chapter 13 debtor. The co-debtor stay in Chapter 13 protects co-debtors from collection actions until the bankruptcy case has closed or the creditor obtains relief from the stay.
Effect Of Automatic Stay
In addition to preventing harassing behavior by creditors, the automatic stay:
- Prohibits the commencement or continuation of legal proceedings against the debtor
- Prohibits acts to collect debts
- Protects the debtor against judgment enforcement
- Protects the debtor against wage garnishment
- Protects the debtor’s property against acts such as repossession, foreclosure, judgments and creating/perfecting liens.
Any of these actions taken in violation of the automatic stay is void, whether or not the creditor has actual knowledge that the stay was in place.
A creditor that willfully violates the automatic stay can be ordered to pay the debtor’s actual damages, attorney’s fees, and, if appropriate, punitive damages.
Effect Of Prior Bankruptcy Filings On The Automatic Stay
If an individual has previously filed for bankruptcy, different rules may apply to the automatic stay in the current bankruptcy case.
According to 11 U.S.C. § 362(c)(3) of the Bankruptcy Code, if a prior bankruptcy case was dismissed in the year before the present bankruptcy filing, the automatic stay terminates 30 days after filing for bankruptcy, unless it has been extended by the court after a showing by the debtor that the case was filed in good faith.
Section 362(c)(3)(C) of the Bankruptcy Code states that the following elements will constitute a presumption that the bankruptcy case was not filed in good faith, and that the automatic stay should not go into effect:
- More than one previous bankruptcy case was pending within the preceding one year period;
- A previous bankruptcy case was dismissed within a one year period after the debtor failed to file or amend documents as required by the Bankruptcy Code or the court without a substantial excuse; failed to provide adequate protection as ordered by the court, or failed to perform the terms of a plan confirmed by the court; or
- There has not been a substantial change in the financial affairs of the debtor since the dismissal of the most recent preceding bankruptcy case.
Although these are the presumptions that a case was not filed in good faith, these presumptions may be rebutted if the debtor can show clear and convincing evidence to the contrary.
Pursuant to § 362(c)(4) of the Bankruptcy Code, if two or more bankruptcy cases have been dismissed within the previous year, the automatic stay does not go into effect. However, the debtor may seek an order to impose the stay, by demonstrating that the bankruptcy case was filed in good faith. A request to impose the stay must be made within 30 days of the filing of the current bankruptcy case.
Exceptions To The Automatic Stay
Under section 362(b) of the Bankruptcy Code, there are 28 exceptions to the automatic stay, or reasons that the stay will not go into effect in certain circumstances. The exceptions that primarily affect most consumers are:
- Criminal proceedings
- Paternity proceedings
- Establishment or modification of a domestic support obligation
- Child custody or visitation proceedings
- Divorce or dissolution of marriage proceedings, except to the extent that such proceeding seeks to determine the division of property that is property of the estate
- Civil proceedings regarding domestic violence
- Collection of domestic support obligations from property that is not the property of the bankruptcy estate
- Residential eviction if the landlord had obtained a judgment of possession prior to the filing of the bankruptcy petition. However, a debtor in this situation can seek a 30-day stay if the debtor files a certification with the court claiming that the debtor has a right to cure the monetary default under non-bankruptcy law, and the debtor, or an adult-dependent of the debtor, has deposited with the clerk of the bankruptcy court all rent that would become due during the 30 day period after the filing of the bankruptcy petition (11 U.S.C. § 362(b)(22) and (l)(1)).
Long Island Automatic Stay Resources
The Bankruptcy Court for the Eastern District of New York – This court serves the Eastern District of New York, including the counties of Nassau, Suffolk, Brooklyn and Queens and is a unit of the U.S District Court. All bankruptcy proceedings in the Eastern District of New York are filed in this court.
Chapter 3 of the United States Bankruptcy Code – Title 11 of the United States Code, which is also known as the Bankruptcy Code defines the federal rules and laws regarding bankruptcy. This link is direct to section 362 of Chapter 3, which applies to the automatic stay in bankruptcy.
The Law Office of Andrew M. Doktofsky, P.C. | Long Island Bankruptcy Attorney
Contact The Law Office of Andrew M. Doktofsky, P.C., today at 631-812-7712 or complete my online form for a free consultation about the bankruptcy automatic stay throughout Suffolk County, Nassau County and Long Island. Andrew Doktofsky is an experienced Long Island bankruptcy lawyer who will explain how the automatic stay can protect you from creditor harassment in New York.
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