September 16, 2012 /24-7PressRelease/
-- Automatic Stay in Bankruptcy
One of the most important protections bankruptcy offers is that of the automatic stay which stops most collection actions against the person who filed bankruptcy; known as the Debtor.
Congress intended the stay to give the Debtor "breathing room," from the stress caused by being hounded by debt collectors and worrying about possibly losing a home or other basic necessities. The stay also gives the trustee time to review the Debtor's financial situation and to distribute assets to creditors in order of priority. People considering bankruptcyshould understand how the stay operates and how it can benefit them.
When Does the Stay Take Effect?
What makes the automatic stay so great is that it is automatically imposed upon the filing of the bankruptcy petition. No court order is necessary, because it goes into effect the second your petition is filed.
How the Stay Benefits Debtors
For people filing bankruptcy, the automatic stay helps Debtors in many ways. While the stay is in effect, a creditor may not try to collect on a debt by contacting the Debtor, pursue judgments against the Debtor, garnish wages or repossess property. It stops all collection actions by creditors, including foreclosures and evictions. It can also prevent utility companies from disconnecting service for non-payment of bills. The stay prevents creditors from garnishing wages and government agencies from taking back money for overpayment of benefits, so a Debtor's income stream will not be as heavily burdened while the stay is in effect.
-Unsecured Debts: When there is an unsecured debt, such as credit card debt and medical bills, the collection effort stops forever. This is because once the discharge is granted; that debt is wiped out -and there is nothing to collect on.
-Secured Debts: When there is a secured debt, (which is a debt where there is property such as a house or car that serves as collateral) it works a little bit differently. The Automatic Stay prohibits all collection efforts while the bankruptcy case is pending. When the discharge is granted, the Debtor is no longer obligated to repay the debt (it is wiped out); but the lien on the property is not wiped out. Therefore, the Debtor will have to decide whether to give back the property or pay the creditor what it is worth.
Length of the Stay
The length of the stay varies depending upon how many times the Debtor has previously filed bankruptcy.
If this is the Debtor's first bankruptcy filing, then the automatic stay lasts until one of the following occurs:
-The creditor obtains a lift of the stay from the bankruptcy court. The creditor does so by showing that: the stay is not serving its intended purpose and that the creditor's interests are harmed by letting the stay continue;
-The court issues a bankruptcy discharge, in which case the stay is replaced by a permanent injunction that stops creditors from collecting on the discharged debts; or
-The item the creditor seeks is no longer property of the bankruptcy estate.
If the debtor has filed bankruptcy before then the length of the stay is as follows:
-If a Debtor has previously filed one bankruptcy in the past year, and their case was dismissed, the automatic stay will last only 30 days. This can be extended by Court order.
-If a Debtor has filed two or more bankruptcies in the past year and the cases were dismissed there is no stay.
Consequences for the Creditor Violating the Stay
The Bankruptcy Code provides Debtors with a powerful tool if creditors and other parties willfully violate the automatic stay; these include an award of actual damages, attorney fees and, sometimes in appropriate circumstances, punitive damages.
Talk to an Attorney
Filing bankruptcy is not a decision one makes lightly, but it is a choice to consider for those in severe financial straits. If you are struggling financially, meet with a seasoned bankruptcy lawyer who can discuss your situation with you and advise you of your options.
Article provided by Levitt & Slafkes, P.C.
Visit us at http://www.levittslafkes.com---
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