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What is an Automatic Stay?

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An automatic stay is a court order that requires a bankruptcy filer’s creditors to halt their collection attempts. This is to provide the filer with some relief while he or she completes the bankruptcy process. It is important to note that not all debt collection attempts are halted by the automatic stay and in some cases, it is possible for a creditor to have the automatic stay lifted and resume collection attempts.

Before you file for bankruptcy, talk to an experienced bankruptcy lawyer about what to expect from the process. The automatic stay is only one of the components of a bankruptcy case. Your lawyer can also advise you about which debt collection attempts are not subject to the automatic stay and what you can do if one or more of your creditors have the stay lifted.

When Does the Automatic Stay Go Into Effect?

The automatic stay goes into effect the moment you file for bankruptcy. If you are filing for Chapter 13, it does not matter if your repayment plan has not yet been approved.

Exceptions to an Automatic Stay

Even after the automatic stay goes into effect, certain creditors can continue their collection attempts. Debts not affected by an automatic stay include:

  • Child support – This includes any wage garnishment, income withholding, or tax return interception made in an effort to satisfy child support debt and child support owed after bankruptcy is filed;
  • Alimony debt;
  • Actions by the IRS; and
  • Income withholding to repay an ERISA pension loan.

Relief from the Automatic Stay

A creditor may seek relief from the automatic stay by filing a motion to have it lifted. Typically, this action is taken by secured creditors in cases where the filer is not making payments on his or her collateral. The relief may be granted if the creditor demonstrates that the automatic stay somehow jeopardizes their interest in the property in question or if the stay does not provide the creditor with adequate protection, meaning that it is not likely that the filer will continue to make payments to the creditor for the secured debt. Unsecured creditors may seek relief from automatic stays as well. Generally, this is granted if the unsecured debt is not included in the bankruptcy discharge.

You are entitled to receive notice of any motions filed to lift your automatic stay. You are also entitled to a hearing to determine if the stay should be lifted.

Work with an Experienced Merrillville Bankruptcy Lawyer

Bankruptcy is a complicated process. As a filer, it is in your best interest to work with a bankruptcy lawyer who can be your advocate as you work through your bankruptcy case. To learn more about the bankruptcy process and your rights as a filer, speak with an experienced bankruptcy lawyer. Contact The Whitten & Whitten today to set up your initial consultation with us.

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