What is an Automatic Stay, and will it Help me?

Filing a bankruptcy case will offer immediate relief from the constant harassment from collection agencies and representatives that debtors suffer from prior to filing.  As soon as you file your bankruptcy petition, the automatic stay goes into effect. An automatic stay is an injunction that takes effect as soon as the case is filed with the court. You do not need to file any additional documents or appear for a hearing to make the automatic stay go into effect; once you file your bankruptcy petition, your creditors must stop almost all collection efforts.

Once an automatic stay has been issued, creditors may not contact debtors, demand repayment, file a lawsuit or attempt to seize a debtor’s property. The only option a creditor has to be able to collect from you is to file a motion for relief from automatic stay, and argue at a hearing why the automatic stay should not apply. Motions for Relief are typically filed by mortgage companies or car creditors when ongoing payments are not being made.

As soon as the bankruptcy case is filed, the court will notify your creditors via mail.  This means that typically, your creditors will receive notice of your bankruptcy within one week of the date your bankruptcy case was filed.  Debt collectors who knowingly violate a stay can be sanctioned after your bankruptcy attorney files a motion with the court. In almost all cases, violation of the automatic stay results because of lack of notice. As soon as your creditor has notice of your bankruptcy, they typically will stop any collection efforts to avoid being sanctioned by the court. If the creditor was unaware of the stay, however, the court will not impose any sanctions.  If your creditor unknowingly seizes some of your property, such as collecting from a garnishment or repossessing a car, they will have to return your property, regardless of if they received notice from the court or not.

While the automatic stay does protect you from most collection efforts, an automatic stay will not stop collection efforts on certain debts including:

-Criminal sanctions – Criminal defendants are often ordered to pay the costs of their prosecution, fines and/or restitution costs. Automatic stays do not interrupt payment of these obligations.

-Child and spousal support – If you are obligated to pay child support or spousal support, especially if you are behind on it, you will have to continue making these payments.

-Taxes-  If you are obligated to pay the IRS or state for prior income taxes, you will still need to continue making these payments.

The automatic stay is in place as long as your bankruptcy case is ongoing. If your case is dismissed, your creditors can resume their collection efforts.  The automatic stay is one of the many positive benefits to filing a bankruptcy.  If you are interested in finding relief from collection efforts, contact a St. Louis Bankruptcy attorney today!

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