When a debtor files a bankruptcy case, the Bankruptcy Code triggers an injunction against starting or continuing any action by a creditor against the debtor or the debtor's property. This injunction is named the "automatic stay." The automatic remain protects the debtor from his or her creditors and in effect subjects creditors to the supervision of a bankruptcy judge. The filing of a bankruptcy case brings a debtor's assets and creditors prior to the bankruptcy court where the rights of all the parties can be addressed.
PROHIBITIONS
The automatic remain prohibits creditors from:
- commencing or continuing collection lawsuits
- making collection calls and other contacts
- repossessing a debtor's assets
- undertaking foreclosure sales
- beginning or continuing wage garnishments or other levies
The automatic remain remains in effect until:
- a bankruptcy judge lifts the stay upon the request of a creditor
- the debtor obtains a discharge of indebtedness
- an asset is removed from the bankruptcy estate
In a Chapter 7 case, the stay will avoid an impending foreclosure on a debtor's actual estate. On the other hand, if the remain is lifted, the creditor is then free of charge to proceed against that collateral. In a Chapter 13 case, the remain remains in effect during the life of the Chapter 13 repayment program. When the debtor gets a discharge, the automatic remain is replaced by a permanent injunction prohibiting creditors from taking any action against the debtor on the discharged debts.
EXCEPTIONS TO THE Stay
On the other hand, the automatic stay will not prohibit the following:
- criminal proceedings
- actions to collect upkeep and household support orders or their modification
- tax audits, demands for tax returns, or assessments of tax liability
Note that efforts to collect taxes are still stayed since taxing authorities are also subject to the remain.
CREDITOR VIOLATIONS OF THE Stay
Below the Bankruptcy Code, a person who knowingly violates the remain through the pendency of an individual bankruptcy proceeding may be liable for damages brought on by the violation. Any action a creditor takes in violation of the stay has no legal impact and could possibly be void or voidable. Due to the fact some time might pass before a creditor receives written notice of a bankruptcy case, the debtor or his or her lawyer should certainly give written notice to any creditors who could proceed against the debtor.