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What Does the Automatic Stay Stop?

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Generally speaking, the automatic stay stops foreclosures, repossessions, lawsuits, wage garnishments, and tax levies.

The automatic stay is a legal provision that takes effect automatically when an individual or business files for bankruptcy. It is designed to provide immediate relief by temporarily halting most creditor actions and collections against the debtor. The automatic stay is a crucial component of bankruptcy law, and it serves to give the debtor a breathing space to reorganize their finances or liquidate assets in an orderly manner. The automatic stay stops or temporarily suspends various types of actions by creditors, including:
  1. Creditor Harassment: The automatic stay prohibits creditors from contacting the debtor to collect debts. This includes phone calls, letters, and other forms of communication.
  2. Foreclosure Proceedings: If a debtor is facing foreclosure on their home, the automatic stay can temporarily halt the foreclosure process, providing the debtor with time to propose a plan to address the mortgage arrears.
  3. Eviction Proceedings: The automatic stay can also prevent landlords from evicting a debtor, giving the individual or business an opportunity to reorganize their affairs.
  4. Repossession of Property: If a debtor is at risk of having property repossessed (such as a car), the automatic stay can prevent the creditor from taking such action temporarily.
  5. Lawsuits and Legal Actions: The automatic stay puts a pause on most legal proceedings against the debtor. This includes lawsuits, judgments, and other legal actions seeking to collect on debts.

While the automatic stay provides significant protection to debtors, there are exceptions.

Certain types of actions, such as criminal proceedings, certain family law matters, and some tax-related actions, may not be halted by the automatic stay. Additionally, secured creditors may seek relief from the stay to repossess collateral if the debtor is not making payments. It's important to note that the automatic stay is not a permanent shield, and creditors may seek permission from the bankruptcy court to lift the stay in specific circumstances. Additionally, the automatic stay's duration can vary depending on the type of bankruptcy and the debtor's history of bankruptcy filings.

What Happens if Creditor Violates Automatic Stay?

If a creditor violates the automatic stay in bankruptcy, it is considered a serious matter, and there are consequences for such actions. The automatic stay is a fundamental protection provided to debtors during bankruptcy proceedings, and violating it can result in penalties for the creditor. Creditors are generally aware of the automatic stay and the consequences of violating it, but mistakes or intentional actions may still occur. Debtors who believe that a creditor has violated the automatic stay should promptly inform their bankruptcy attorney. The attorney can then take appropriate legal action, such as filing a motion for sanctions or seeking other remedies from the bankruptcy court. It's important for both debtors and creditors to fully understand their rights and responsibilities in the bankruptcy process. Legal advice from a qualified bankruptcy attorney is crucial for navigating the complexities of bankruptcy law and ensuring compliance with court orders. Each situation is unique.  For a personalized review of your situation, call David A. Arietta at (925) 472-8000.