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Bankruptcy’s Automatic Stay

Bankruptcy Attorney in Raleigh, North Carolina

A debtor struggling to pay off delinquent accounts seeks protection by filing bankruptcy. Bankruptcy is a legal process that allows you to reorganize your finances, pay off a creditor, rebuild your credit, and pursue debt settlement. It is often considered the last resort to help achieve a debt-free life and have a fresh start.

One of the rights of a debtor is the right to be free from collection attempts by creditors after the bankruptcy petition has been filed. Once you declare bankruptcy, the automatic stay will immediately take place and protect you from creditors and bill collectors. It is one of the most important aspects of the bankruptcy process.

At Cameron Bankruptcy Law, we have been providing legal services to people who have or are going through bankruptcy for decades. Our competent North Carolina bankruptcy lawyers will do everything to ease your burden so that you can focus on getting your financial freedom back. We will help you understand how an automatic stay can benefit you in your bankruptcy case.

Call us now at (919) 899-2776 and schedule a free consultation.

 

What is an automatic stay?

An automatic stay is a court-ordered injunction and provision in the United States bankruptcy law that temporarily stops creditors, collection agencies, and government entities from pursuing debtors for money owed. It is called “automatic” because it becomes effective immediately when the debtor files the bankruptcy petition. It prevents all debt collection actions, including litigation against the debtor. This means phone calls, letters, repossession efforts, and even foreclosure procedures must stop.

The automatic stay gives the debtor a breathing space. With the help of the bankruptcy trustee, a debtor will have time to evaluate the financial situation and develop a repayment plan. A knowledgeable Raleigh bankruptcy lawyer can explain the various things that an automatic stay can do for you.

 

How long does the automatic stay last?

The automatic stay expires when the bankruptcy case has been discharged. The type of bankruptcy chapter will determine how long your stay is active. Chapter 7 usually lasts for 3-5 months while Chapter 13 could take anywhere from three to five years. However, multiple bankruptcy filings can also affect the length of an automatic stay. If you’ve had another bankruptcy case dismissed in the past year, the automatic stay will only last 30 days. A history of bankruptcy filings could eliminate an automatic stay from consideration and may warrant no stay at all. A reliable North Carolina bankruptcy attorney can help you determine the length of an automatic stay.

Once the bankruptcy case is over and the qualified debts are discharged, the automatic stay will be lifted. The creditor can resume collection actions on debts not discharged during the bankruptcy. In some cases, the bankruptcy court may decide to lift the automatic stay early, depending on the circumstances. This usually happens when a creditor petitions the court to lift the stay for a valid reason. For example, If the creditors get a court order lifting the automatic stay, they can go ahead with the repossession or foreclosure of the property (such as real estate) that secures the debt.

 

What can an automatic stay prevent?

One of the most powerful tools the United States Bankruptcy Code provides is the automatic stay. You will be given the time you need to resolve your debts following the law, without being pursued by creditors. A qualified Raleigh bankruptcy attorney can help you understand what an automatic stay can do for you.

Whether you file bankruptcy Chapter 7 or Chapter 13, the automatic stay stops creditors from taking certain actions to recover debts. The automatic stay prohibits:

 

Foreclosure Proceedings

If your home is being foreclosed on, the automatic stay will stop the proceedings for as long as your bankruptcy case is open. A Chapter 7 bankruptcy will make sure you are not liable for a mortgage deficiency due to the foreclosure. On the other hand, a Chapter 13 bankruptcy will allow you to catch up on your past payments and keep your home. 

 

Utility Disconnections

If you are behind on a utility bill, the utility company might threaten you with disconnected electricity or water service. An automatic stay won’t erase what you owe in unpaid utility bills. However, it can keep your utilities from getting shut off for at least 20 days.

 

Evictions

If you’re being evicted from your home, the automatic stay can give you temporary help and relief from eviction. However, a landlord can continue with eviction proceedings by requesting the automatic stay to be lifted while the bankruptcy filing is still active.

 

Wage Garnishments

If you’ve filed for bankruptcy, an automatic stay will stop wage garnishments. Depending on the debt, it could get discharged into bankruptcy. If the debt that prompted your wage garnishment is wiped out in bankruptcy, filing for bankruptcy could stop the garnishment permanently.

 

What are the exceptions to the automatic stay?

The automatic stay comes with a lot of benefits. However, there are limits to what the automatic stay can do. It doesn’t protect you from all debts or legal actions. A seasoned bankruptcy lawyer in Raleigh NC can help you determine the situations where the automatic stay will not help you. Congress has decided some actions are so important that the automatic stay does not apply to them. The most common of these enforcement actions include the following:

 

Criminal Proceedings

The automatic stay cannot stop a criminal proceeding. For instance, if you are involved in a criminal proceeding that involves both a crime and a debt, the automatic stay will only stop the debt portion of the proceeding. Bankruptcy laws must not be used to shield debtors from criminal proceedings.

 

Child Support

The automatic stay will not stop a lawsuit that tries to establish, modify, or collect child support payments and alimony. Furthermore, the stay will not stop a lawsuit against you seeking to establish paternity. Child support is among the types of debts that must be paid first.

 

Repayment of Pension Loans

The automatic stay can protect you against wage garnishment. However, employers can continue to deduct your pension loan payments through garnishment. Money can be withheld from your income to repay loans from job-related pensions.

 

Some Tax Proceedings

An automatic stay cannot stop certain tax proceedings. The IRS can still audit you, demand a tax return, issue a tax deficiency notice, issue a tax assessment, or demand payment of such an assessment. However, the automatic stay can temporarily stop the IRS from issuing a tax lien or seizing your property or income.

 

What happens if a creditor violates the automatic stay?

Once the creditor receives the notice of bankruptcy filing and automatic stay, any collection actions done in violation of the stay will not be taken lightly by the bankruptcy court. If a creditor has violated the automatic stay, he or she can be held in contempt and sanctioned by the court.

Bankruptcy laws allow a debtor to file a civil suit against a creditor for willful violation of the automatic stay. A creditor’s attempt to repossess the debtor’s property in violation of the automatic stay will not have any legal effect. Hire an experienced North Carolina bankruptcy attorney so that when your case is filed, the automatic stay is created and sent to the creditors to stop any collection actions against you.

Creditors do have the ability in certain circumstances to bring a motion to modify the automatic stay and remove that bankruptcy protection. Creditors cannot take action to recover debts that are discharged in bankruptcy, but they can foreclose and repossess assets with valid liens after the case is closed if the debtor fails to make the required monthly payments.

 

Hire a bankruptcy lawyer in North Carolina now!

If you are facing significant financial hardships, filing for bankruptcy may be the best option for you. When you file for bankruptcy, an automatic stay will immediately come into effect. It provides immediate relief and protection against harassing creditors and debt collectors.

To know more about the automatic stay and bankruptcy process, it is highly advisable to consult our experienced Raleigh bankruptcy lawyers at Cameron Bankruptcy Law. Our bankruptcy law firm will help you decide whether bankruptcy is the right debt-relief option for your financial situation. No matter how complex your bankruptcy case is, we will be with you every step of the way and guide you throughout the bankruptcy process.

Schedule a free consultation by calling us now at (919) 899-2776.

Raleigh Bankruptcy Attorneys

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