Examples of the automatic stay and how it operates in bankruptcy law

“Automatic stay” is protects you from creditors during bankruptcy. While a bankruptcy case is active, be that a Chapter 7 or 13, no creditors or collectors may contact or harass the individual or organization in bankruptcy. Specifically the definition of automatic stay on the U.S. Courts official website is, “An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.[i]” As soon as creditors receive the initial notice of the bankruptcy, they may not continue any collection activity during the bankruptcy case or they would violate the automatic stay, a federal offense.

Examples of protections from creditors during an automatic stay.

Many individuals and business owners seek the protection of bankruptcy laws and the automatic stay provision to prevent multiple wage garnishments, evictions and foreclosures. In addition, some people worry their utilities might be disconnected. The automatic stay applies to these scenarios in varying degrees. For example, if the electricity is about to be cut off it might make sense to prevent a disconnection for at least 20 days. Garnishments also hurt the ability to keep up with the bills. No more than 25% of an individual’s wages may be garnished directly, but when multiple creditors come calling with garnishments, the automatic stay may look really good to someone who really doesn’t want the human resources department at work getting involved in responding to multiple creditors.

Examples of automatic stay limitations and ways creditors and collectors try to get around the law.

When the tax man shows up at your door you cannot send him away with an automatic stay. In fact, the IRS may audit you, issue tax deficiency notices and otherwise use all the available tools at their disposal to proceed with taxing you. Notwithstanding, the IRS may not seize your income or property while you are in bankruptcy with an active and enforceable automatic stay. The automatic stay does not affect Child support and matters affecting the family. Likewise, a criminal court may proceed with matters involving the criminal component of certain actions involving debts and an order to pay a fine or comply with court orders may still be effective despite the automatic stay. Additionally, multiple bankruptcy filings and violations of bankruptcy court rules can affect the automatic stay.

Just as a petitioner, seeking the protection of the automatic stay wants to maximize their rights under the law, the creditor and collector on the other end may seek to circumvent the automatic stay and find a way to collect their debt and proceed under an exception to the law. An experienced bankruptcy attorney can help clients whose creditors ask the bankruptcy court to “lift” the automatic stay when they argue to the court that the automatic stay is not being used within the spirit of the law and legislative purpose the stay intends to satisfy.

Chicago attorney, Joseph Wrobel, has decades of experience working with complex bankruptcy issues including those touching on automatic stay issues and the legal challenges that can arise, including violations of automatic stay and federal bankruptcy laws. To learn more about bankruptcy and your options, contact an attorney at Joseph Wrobel, Ltd. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel, Ltd. on Twitter. If you need legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.

[i] U.S. Courts Website Glossary.