When it comes to dealing with creditors, it is extremely important to be aware of the Automatic Stay. Governed by 11 U.S.C. § 362, the Automatic Stay is an order that prevents creditors from taking certain actions against debtors during Bankruptcy proceedings. Once you begin filing for Chapter 7 or Chapter 13 Bankruptcy and have filed your Bankruptcy Petition, your creditors will be notified of your filing, and the Automatic Stay comes into play. This will prohibit creditors from attempting to collect on debts against the debtor during the relief process. If creditors fail to follow the guidelines of the Automatic Stay, they may face a penalty.
WHAT DOES THE AUTOMATIC STAY PREVENT?
- HOME FORECLOSURE
Once your Bankruptcy Petition has been filed, mortgage companies, or whichever financial institution holds your mortgage, are no longer able to foreclose on your property.
For example, Carl and Susan are homeowners and have not made a mortgage payment in 24 months. During this time, the two seeked a loan modification from their mortgage company but their request was denied. After trying to negotiate with the mortgage company, Carl and Susan were unable to avoid a foreclosure and forced into a public auction of their home in 21 days. In order to prevent a foreclosure from occurring, Carl and Susan are able to file for relief through Chapter 7 or Chapter 13 and utilize the Automatic Stay in their favor.
If you are facing a foreclosure, contact Sacramento Bankruptcy Lawyer ASAP at 916-800-7690 and local Sacramento Bankruptcy Lawyer Pauldeep Bains will help you understand how the Automatic Stay can be beneficial to you.
- CREDITOR CALLS
When dealing with creditors, you may receive bothersome phone calls. The Automatic Stay prevents creditors from making these frustrating calls and demanding that you pay them.
For example, Sam stopped making payments on his credit card and has been receiving daily phone calls from creditors demanding he make a payment for several months. The harassing phone calls are creating an additional stress in his life, which is affecting his health. By filing for Bankruptcy, the Automatic Stay will prevent Sam from receiving these phone calls. Creditors are informed that you have hired a Bankruptcy Attorney and will no longer bother you with phone calls.
Contact our office today and begin taking steps to prevent the harassing calls from continuing.
- WAGE GARNISHMENT or BANK LEVY
After a creditor has obtained a judgment against you for not making payments, he/she will generally request the Court issue an Earnings Withholding Order (i.e. wage garnishment) or Bank Levy. With a wage garnishment, the Court orders for your employer to keep a portion of your regular paycheck, which they will give to your creditors directly. On the other hand, a bank levy occurs directly between your bank and the creditor. Creditors first must receive a money judgment from the Court and become a “judgment creditor.” Once the Court has given them the authority to do so, creditors may contact your bank to withdraw money from your account.
For example, Allison was recently sued by her credit card company. The credit card company won the lawsuit and issued a judgement for $10,000. If Allison decides to seek relief through Chapter 7 or Chapter 13, she will no longer have to fear that the credit card company garnish her wages or have her bank account levied.
Call Sacramento Bankruptcy Lawyer at 916-800-7690 right away and Bankruptcy Attorney Pauldeep Bains will prevent creditors from gaining access to your finances without your knowledge or consent.
- UTILITY DISCONNECTIONS
While seeking relief based on utility bills alone might not be the most practical, they can contribute to financial hardships when you already dealing with creditors. When utility bills are not being paid on time, you may face having your utilities disconnected. With the Automatic Stay, you will gain some additional time before any disconnections can occur.
- EVICTION
If you are renting your current apartment or home and have not been making payments on time, you may face eviction from your landlord. When filing for Bankruptcy, the Automatic Stay will allow for the eviction process to be delayed. However, the effects of the Automatic Stay are determined by whether or not you had already begun your Bankruptcy filing when your landlord received a Judgement for the residence.
If your landlord obtained a Judgement AFTER you filed for Bankruptcy, the Automatic Stay will protect you from receiving a termination notice or prevent being evicted.
If your landlord obtained a Judgment BEFORE you filed for Bankruptcy, the Automatic Stay will be placed if you have exhibited proof of a deposit on your rent to the Clerk of the Court in the first 30 days after you have filed. Official Form 101A must be filed, and your landlord must receive a copy. After the initial 30 days have passed, the Automatic Stay may go away. However, if you wish to continue receiving protection from the Automatic Stay and remain in your residence, you must pay your landlord the entirety of the amount owed to them. In addition, the Statement About Payment of an Eviction Judgment Against You must be filed with the Court, and a copy must be given to your landlord during the initial 30-day period.
WHAT DOESN’T THE AUTOMATIC STAY PROTECT ME FROM?
While the Automatic Stay can be beneficial during the time of your Bankruptcy case, it does have its limitations and cannot protect you from everything. Established by Congress, 11 U.S.C. § 362(b) illustrates certain areas in which the rights of other parties outweigh those of the debtor.
Some of the most common situations where the Automatic Stay cannot provide you protection include:
- Collection attempts on debts after filing for Bankruptcy
- Criminal proceedings
- Loans from your retirement account
- Actions taken by taxing authorities seeking tax audits, issue deficiency notices, tax returns, and tax assessments
- Divorce proceedings
- Actions for a Child Support Order or any changes needed to be made
- Establishing paternity
- Child custody or visitation
- Multiple Bankruptcy filings
- If the Debtor has had 1 prior Bankruptcy case within 1 year of another case, by 11 U.S.C. 362(a) the Automatic Stay will no longer be in place on the 30th day after the later case has been filed. 11 U.S.C. § 362(c)(3)(A)
- If the Debtor has had 2 prior Bankruptcy cases within 1 year of another case, by 11 U.S.C. 362(a) the Automatic Stay will not be in effect once the later case has been filed. 11 U.S.C. § 362(c)(4)(A)
- With both circumstances, the debtor still has the option to file a Motion in their later case in which they request the Court extend the Automatic Stay past the 30 day limit (11 U.S.C. 362(c)(3)(B)) or have the Stay imposed (11 U.S.C. § 362(c)(4)(B)).
- Relief from Stay Motions
- Depending on the situation, sometimes a creditor may file a Motion for Relief From the Automatic Stay. If the Court agrees and chooses to grant the Motion, the Automatic Stay will no longer be in place.
- Example: Sam is facing a foreclosure on his home and files for a Chapter 7 Bankruptcy proceeding. Meanwhile, his mortgage company may file a Motion for Relief from the Automatic Stay. If granted, the mortgage company will be able to continue foreclosing on Sam’s home despite him entering a Bankruptcy filing. In order to keep his home, it would be best for Sam to consider a Chapter 13 filing instead of a Chapter 7.
- Depending on the situation, sometimes a creditor may file a Motion for Relief From the Automatic Stay. If the Court agrees and chooses to grant the Motion, the Automatic Stay will no longer be in place.
HOW CAN WE HELP?
The Automatic Stay can be extremely beneficial to you and your Bankruptcy case when used -properly. Mr. Bains has the experience of understanding the Automatic Stay in great detail and knows the ways it may be applied in various situations. Contact our office today and speak directly with Sacramento Bankruptcy Lawyer Pauldeep Bains to see how the Automatic Stay may benefit you. Please call 916-800-7690 immediately to schedule your no-hassle consultation with Mr. Bains and discuss your personal situation.
We help clients in the following areas: Sacramento, Elk Grove, South Sacramento, West Sacramento, Natomas, Citrus Heights, Antelope, Fair Oaks, Gold River, Rancho Cordova, Roseville, Rocklin, Lincoln, Wheatland, Yuba City, Marysville, Woodland, Davis, and Lodi.
