Automatic Stay and Bankruptcy: What it Will and Won’t Do

Bankruptcy Automatic Stay

The automatic stay is what pushes many people into filing for bankruptcy. They might be headed in that direction anyway and filing is imminent, but it’s the benefit of stopping creditors from collection actions, at least temporarily, that pushes them over the hump of filing.

Unfortunately, for all the automatic stay can do for someone struggling with debt, there are a few things it cannot do. It’s important to understand the power of the automatic stay and to know what to expect before filing so your expectations are reasonable.

What the Automatic Stay Does for You

First, let’s look at how the stay works and what it does.

An automatic stay is a court injunction that bars creditors from collection efforts against a person who has filed for bankruptcy. It goes into effect the moment you file and can only be lifted by the court after a creditor has shown it has the authority to continue collecting despite bankruptcy.

This means if you’re dealing with daily calls from creditors and constant nagging requests for payment, the automatic stay will bring an end to those troubles. It will also stop foreclosure efforts on your home, at least temporarily. You can read more about the power of the automatic stay as it relates to foreclosure here.

At the very least, the automatic stay gives you time to get organized and come up with a plan.

What the Automatic Stay Won’t Do

Unfortunately, as powerful as the automatic stay can be when you file for bankruptcy, there are a few things it can’t help with.

For instance, the automatic stay does nothing regarding family law issues. If you’re attempting to modify child support or alimony arrangements or you’re dealing with any other legal issue related to family matters the automatic stay will have no effect. Collection efforts related to non-payment of court-ordered child support or alimony will continue despite the automatic stay.

The automatic stay also stops any law enforcement action against you. If a criminal prosecution is in progress or you are under investigation when you decide to file for bankruptcy, filing will not affect those matters.

Additionally, some actions related to taxes can continue regardless of the automatic stay. State and federal government officials cannot record liens or levy assets for collection once you’ve filed, but they can demand you file your return, audit any returns you’ve already filed, and assess taxes you might owe.

The automatic stay also does not stop court-ordered sanctions for misconduct in litigation. If there is a civil contempt sanction against you the automatic stay does nothing to prohibit it.

How the Automatic Stay Helps You

Despite the automatic stay not being all-powerful, it’s still going to go a long way in helping you if you are struggling financially. There are a few specific things it won’t do, but overall you’re going to experience a great deal of relief once it goes into action.

Every case is different, so it’s important to speak to an attorney about your situation and find out what the automatic stay will and will not do for you.

To learn more or to determine how the automatic stay will affect your case, contact the Law Office of Robert M. Geller at 813-254-5696 to discuss your situation.