Automatic Stay

What Is Automatic Stay?

The Automatic Stay is one of the most powerful tools that anyone dealing with an aggressive creditor needs to know about. The Automatic Stay is an injunction that disallows creditors from taking certain actions against you. As soon as a Debtor files for Chapter 7 or Chapter 13 relief, the Automatic Stay is initiated. The creditors are prevented from pursuing collection attempts against the Debtor. This can be vital for a person when dealing with an intimidating creditor.

The Automatic Stay is governed by 11 U.S.C. § 362. This section of the Bankruptcy Code lays out in detail what the Automatic Stay can and cannot do for you. Moreover, as the name suggests, the Automatic Stay takes effect automatically upon the filing of the Bankruptcy Petition. No additional motion is required.

What Are Some Common Things The Automatic Stay Can Prevent?

  • HOME FORECLOSURE –
    • Upon the filing of your Bankruptcy Petition, if the mortgage company or financial institution that holds your mortgage is attempting to foreclose on your property, they are disallowed to continue with that foreclosure process due to the Automatic Stay taking effect
      • Example – Robert and Katie own a home and haven’t paid the mortgage payment in 24 months. During that time, they have attempted to attain a loan modification with the mortgage company but were denied. Robert and Katie have continued to think that they could work it out with the mortgage company and avoid a foreclosure. However, none of this has worked and now their home is set to sell at a public auction in 21 days. If Robert and Kelly want to prevent that from happening, they can file for Chapter 7 or Chapter 13 Bankruptcy relief and their home will not sell at the public auction in 21 days.
      • If you are facing a foreclosure, contact Bains Legal ASAP at 916-800-7690 and local Sacramento Bankruptcy Attorney Pauldeep Bains will help you understand how the Automatic Stay can be beneficial to you.
  • CREDITOR CALLS –
    • The Automatic Stay will force creditors to stop calling your phone and demanding that you pay them.
      • Example – George has been doing his best to avoid creditors for the past several months. He has stopped paying on his credit card obligations and now receives several harassing calls each day demanding that he make a payment. These calls are causing additional stress and health issues for George and he does not know what to do. By filing for Bankruptcy, George would be able to take advantage of the Automatic Stay which would disallow any of the credit card companies from calling him and demanding payment. Moreover, in most cases, once you’ve retained a Bankruptcy Attorney and informed your creditors of this, they will stop calling you immediately.
      • Contact our office today and take the first step in stopping the harassing calls from continuing.
  • WAGE GARNISHMENT or BANK LEVY –
    • If a creditor has obtained a judgment against you for lack of payment, the next step for that creditor would generally be to request the Court issue an Earnings Withholding Order (i.e. wage garnishment) or Bank Levy. Filing of the Chapter 7 or Chapter 13 Bankruptcy will initiate the Automatic Stay and prevent that from occurring.
      • Example - Alicia was recently sued by a particular credit card and the credit card company won the lawsuit and was issued a judgment for $10,000.00. Alicia is now afraid of having her wages being garnished or her bank account levied. By filing for Bankruptcy relief, the Automatic Stay will stop the creditor in it’s tracks. They will not be able to proceed with attaining a wage garnishment or bank levy.
      • Call Bains Legal at 916-800-7690 right away and Bankruptcy Attorney Pauldeep Bains will discuss the benefits of the Automatic Stay with you.
  • UTILITY DISCONNECTIONS –
    • If you have become delinquent on your utilities, it is quite possible that they will be disconnected. Although the amount owed on a utility bill would probably not justify a Bankruptcy in itself, this could be the final threat in a series of collection attempts from various creditors that has been haunting your finances. The Automatic Stay would take effect and allow you some additional time to avoid the disconnection.
  • EVICTION –
    • If you rent an apartment or home and your landlord is seeking to evict you for non-payment of rent, the eviction process may be delayed by a Bankruptcy filing due to the issuance of the Automatic Stay. However, the Automatic Stay will vary depending on whether the landlord has received a Judgment for possession of the property at the time of the Bankruptcy filing or not.
      • Bankruptcy Filed Prior to Landlord Obtaining Judgment
        • Under this circumstance, the Automatic Stay will prevent the landlord from giving the tenant a termination notice or from continuing the eviction process.
      • Bankruptcy Filed After Landlord Obtained the Judgment
        • First 30 days after the Bankruptcy is filed – If under non-bankruptcy rules you have the right to stay in the residence by paying your landlord the entire delinquent amount, you have provided the Clerk of the Court a deposit on the rent that would be due during the 30 days after you file, you have completed Official Form 101A and served your landlord with a copy, the Automatic Stay under 11 U.S.C. § 362(a)(3) would be effective for the 30 day period after your Bankruptcy Petition was filed.
        • Stay after the initial 30 days - If you wish to remain in your residence after the above 30-day period and continue to receive the protection of the Automatic Stay under 11 U.S.C. § 362(a)(3), you must pay your landlord the entire amount owed prior to the 30-day period ending. Moreover, you must complete the Statement About Payment of an Eviction Judgment Against You (Official Form 101B), file it with the Bankruptcy Court, and serve your landlord a copy of it before the 30-day period ends.

Does the Automatic Stay Protect Me From Everything?

As powerful as the Automatic Stay is, it does have it’s limits. There are several exceptions to the Automatic Stay and they can be found in 11 U.S.C. § 362(b). The exceptions were policy decisions created by Congress that the rights of certain parties outweigh the debtors’ need for the protection. Some of the most common situations where the Automatic Stay will not help you are:

  • Criminal proceedings
  • Loans from your retirement account
  • Actions by taxing authorities to demand tax audits, issue deficiency notices, demand tax returns, and make tax assessments
  • Actions for a Child Support Order or a modification thereof
  • Actions to establish paternity
  • Actions concerning child custody or visitation
  • Multiple Bankruptcy Filings
    • If the Debtor has had 1 prior Bankruptcy case pending within 1 year of a later Bankruptcy case, the Automatic Stay under 11 U.S.C. 362(a) shall terminate on the 30th day after the filing of the later case. 11 U.S.C. § 362(c)(3)(A).
    • If the Debtor has had 2 prior Bankruptcy cases pending within 1 year of a later Bankruptcy case, the Automatic Stay under 11 U.S.C. 362(a) shall not go into effect upon the filing of the later case. 11 U.S.C. § 362(c)(4)(A).
    • Under both circumstances, the debtor can file a Motion in the later Bankruptcy case to request the Court to either extend the stay beyond the 30 days (11 U.S.C. 362(c)(3)(B)) or impose the stay (11 U.S.C. § 362(c)(4)(B)). The burden would be on the debtor to prove to the Court that the later case was filed in good faith.
  • Relief From Stay Motions
    • Under certain circumstances, the creditor can file a Motion for Relief From the Automatic Stay and if granted by the Court, the Automatic Stay would be lifted.
      • Example – Sam files a Chapter 7 Bankruptcy to delay a foreclosure from occurring. The mortgage company could file a Motion for Relief from the Automatic Stay in Sam’s Bankruptcy case and if the Court grants the Motion, the mortgage company could continue with the foreclosure process. If Sam’s intentions were to keep the home rather than just delay the process, he should consider a Chapter 13 filing instead.

How Can We Help?

The Automatic Stay is a powerful tool and if used properly, can be of great benefit to you. Mr. Bains understands the Automatic Stay in extensive detail and how it applies in various situations. By contacting our office, you will speak directly with local Sacramento Bankruptcy Attorney Pauldeep Bains about how the Automatic Stay could help you.  Please call 916-800-7690 immediately and schedule your no-hassle consultation with Mr. Bains to 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.

Free Consultation

Here at Bains Legal, we set ourselves apart from other firms because we provide direct client to attorney contact from the initial consultation all the way through the discharge in your particular case. We will not pawn your case off to a staff member at any point through the process. When you call Bains Legal, you WILL speak with local Sacramento Bankruptcy Attorney Pauldeep Bains. Please call Bains Legal ASAP at 916-800-7690 to schedule your FREE in-person or phone consultation with Pauldeep Bains and let Bains Legal begin getting you the fresh start that you deserve.

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Do not let another day go by without knowing your legal options. Contact Bains Legal today and you will hear from our highly qualified and knowledgeable attorney who looks forward to speaking with you at your earliest convenience.

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Do not let another day go by without knowing your legal options. Contact Bains Legal today and you will hear from our highly qualified and knowledgeable attorney who looks forward to speaking with you at your earliest convenience.