What is an Automatic Stay?
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What is an Automatic Stay?

What is an Automatic Stay?
March 13, 2018

Those who file for bankruptcy are granted an “automatic stay,” which means that creditors are prohibited from continuing to attempt to collect debts from them. There are, however, some very important exceptions to this rule, so if you are considering filing for bankruptcy, you should speak with an experienced bankruptcy attorney who can walk you through the filing process and ensure that you are not hounded by relentless creditors.

Exceptions

The automatic stay is one of the most important benefits of filing for bankruptcy because in most cases, it bars creditors from trying to collect money from the borrower. It also goes into effect automatically, so those who file for bankruptcy don’t need to make a number of appearances in court or have their claim approved before obtaining relief. However, there are some important exceptions to this rule where creditors can still attempt to collect money from borrowers, even after they have filed for bankruptcy. These exceptions apply to issues involving criminal or family court matters, taxes, or the collection of alimony or child support.

Criminal Matters

Even after a person has filed for bankruptcy, he or she can still be indicted, tried, sentenced, or incarcerated for any criminal offense that they committed. This applies to both felony and misdemeanor crimes, and may also actually apply to more commonplace offenses, such as traffic infractions.

Collection of Child Support or Alimony

Those who file for bankruptcy and are paying either child or spousal support must continue to do so, either directly or through wage withholding. Failing to pay as ordered comes with serious penalties, including driver’s license suspension, seizure of tax refunds, garnishment of bank accounts, and even jail time. There is an exception for those who fail Chapter 13 bankruptcy, but only if they agree to pay the full arrearage through the Chapter 13 plan.

Taxes

When it comes to tax-related issues, the government is still permitted to take the following steps, even if the taxpayer in question is in the middle of bankruptcy proceedings:

  • Commence or terminate tax audits;
  • Send notices that the taxpayer owes a debt to the IRS;
  • Assess taxes and demand payment;
  • Require the filing of tax returns; and
  • File a tax lien.

Like failing to pay child support, ignoring communication from the IRS and refusing to pay tax debt can have serious repercussions, so if you are considering filing for bankruptcy and owe taxes to the IRS, it is especially important to speak with an attorney.

Family Court Matters

Divorce proceedings can also be initiated after filing for bankruptcy, as can cases involving the following issues:

  • Establishing paternity;
  • Modifying or determining child support or alimony payments;
  • Addressing allegations of domestic violence;
  • Settling visitation or child custody issues; and
  • Dissolving a marriage.

Even if divorce proceedings are initiated, courts may still be barred from determining how assets will be divided between the parties until the bankruptcy issues have been resolved.

Get the Legal Representation You Deserve

If you are thinking about filing for bankruptcy, please contact one of the dedicated bankruptcy attorneys at Kevin M. Schmidt, Attorneys at Law by calling 219-756-0555. We are standing by and eager to help you through every step of your case.

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At the Law Office of Kevin M. Schmidt, P.C., we offer a free consultation during which we will examine the facts of your case and advise you on how best to proceed

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We are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code. This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. Testimonials are not a guarantee, warranty, or prediction of the outcome of your case.