What is the Automatic Stay in Bankruptcy?
If you are considering filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy in Florida, you may know that one of the benefits of consumer bankruptcy is the automatic stay. Under the U.S. Bankruptcy Code, the automatic stay prevents creditors from continuing to collect on debts once a debtor has filed for bankruptcy protection. The automatic stay is an extremely powerful tool for debtors who file for bankruptcy, and it is important to understand how it works and the different ways it can be used.
Understanding the Automatic Stay Under the U.S. Bankruptcy Code
The U.S. Bankruptcy Code makes clear that, as soon as a debtor files a petition for bankruptcy under Chapter 7 or Chapter 13, the automatic stay attaches except in certain circumstances. The automatic stay prohibits creditors from doing any and all of the following:
- Commencing a debt collection action against the debtor;
- Moving forward with an administrative proceeding against the debtor;
- Filing a lawsuit against the debtor to recoup a debt;
- Continuing with an existing lawsuit against the debtor that was filed prior to when the debtor filed for bankruptcy;
- Attempting to enforce a judgment against the debtor that was issued prior to when the debtor filed for bankruptcy;
- Taking any action to obtain possession of property from the debtor, including a home for which the debtor is behind on the mortgage;
- Repossessing a debtor’s motor vehicle;
- Initiating the foreclosure process because the debtor is behind on mortgage payments;
- Moving forward on a home foreclosure;
- Attempting to exercise control over any of the debtor’s property;
- Evicting a debtor from his or her home;
- Disconnecting a debtor’s utility services that are past due;
- Garnishing a debtor’s wages or initiating a garnishment action;
- Attempting to create or enforce a lien against the debtor’s property; and
- Taking any type of collection action on a debt that arose prior to the bankruptcy filing, including calling or texting the debtor about the debt owed.
In short, the automatic stay prohibits creditors from taking almost any kind of collection action against you, including any attempts to obtain debts through lawsuits or repossession. There may be other types of debt collection actions that the automatic stay also prevents, and you should speak with an Orlando bankruptcy lawyer about whether the automatic stay can protect you and your property. At the same time, it is important to recognize that there are exceptions to the automatic stay that you should discuss with your attorney.
Preventing Foreclosure with the Automatic Stay
One of the most powerful uses of the automatic stay in a Chapter 13 bankruptcy case is the prevention of foreclosure. If a debtor is behind on his or her mortgage, and the lender is moving forward with the foreclosure process, filing for Chapter 13 bankruptcy will stop the foreclosure process. Then, since Chapter 13 bankruptcy is a “reorganization” bankruptcy, the debtor can develop a plan for catching up on mortgage payments in order to prevent foreclosure and to keep his or her home.
In other words, the automatic stay is the tool that prevents a foreclosure proceeding from moving forward—either in a Chapter 7 or Chapter 13 case—and then, with Chapter 13 bankruptcy, the debtor can use the bankruptcy process to get back on track with mortgage payments in order to keep the home.
Learn More from an Orlando Bankruptcy Lawyer
If you have questions about filing for bankruptcy, you should get in touch with an Orlando bankruptcy attorney as soon as possible. Contact Anderson & Ferrin to learn more about how we assist consumers in Florida.