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The Amazing Power of the Automatic Stay in Bankruptcy



The Amazing Power of the Automatic Stay in Bankruptcy

29 August 2023
The Amazing Power of the Automatic Stay in Bankruptcy

Have you ever heard about the Automatic Stay in bankruptcy? Think of it like a super shield that helps you when you’re having money troubles. It’s like a superhero move for your financial problems. Imagine a force field that stops debt collectors (those you owe money to) from taking things that belong to you. This special power is the strongest thing in bankruptcy law!

What Does “Stay” Mean in Bankruptcy?

When we talk about “Stay,” we mean that all the things debt collectors usually do to get their money have to take a break. They can’t take away things that belong to you, like your car or your house. Even big government organizations like the IRS have to pause trying to get money from you when the Automatic Stay is in action.

What Doesn’t the Automatic Stay Cover?

There are a few things that the Automatic Stay doesn’t stop. These things make sense because they’re not directly about collecting debts. For example:

  • Things happening in criminal court
  • Issues about child custody
  • Sorting out child support (but they can’t collect past payments)
  • Tax audits and some types of enforcement that aren’t about collecting debts

But for most things, the Automatic Stay is a big help for people who need to protect their belongings when they’re dealing with money troubles.

How Does the Automatic Stay Work?

Imagine this: You decide to file for bankruptcy, and just like that, you get a superpower called the Automatic Stay. It’s like pressing a pause button on the debt collectors. You don’t have to ask for it – the court does it automatically. And guess what? If a debt collector tries to collect from you after the Stay starts, they’re not allowed. They have to undo whatever they did.

For instance, if they were taking money from your paycheck, they have to give it back. Or if they were selling your house, they have to stop.

What Happens When the Automatic Stay Ends?

Usually, the Automatic Stay only lasts as long as your bankruptcy case is open. Creditors don’t really like it because it stops them from getting their money. But sometimes, they can ask the court to lift the Stay. This means they want permission to start collecting again.

If the court agrees, they can go ahead. But they can usually only do a specific thing, like selling your house to pay off a loan. They can’t just start taking money from you personally.

Automatic Stay in Different Types of Bankruptcy

The cool thing is that the Automatic Stay works in all types of bankruptcy. But in Chapter 13 bankruptcy, where the process takes longer (3 to 5 years), creditors might ask to lift the Stay more often. Chapter 7 bankruptcy has a shorter Stay (about 3 to 4 months), so creditors don’t usually get as much time to ask for it to be lifted.

What If Someone Breaks the Automatic Stay?

If a creditor breaks the rules and goes after your things during the Automatic Stay, they can get in trouble. The court might make them give back what they took and even pay a fine. If they didn’t mean to break the rules, sometimes they just have to fix their mistake. But if they keep trying to take your belongings, your lawyer can ask the court to punish them.

To Sum It Up

The Automatic Stay in bankruptcy is like a powerful shield that keeps your belongings safe from debt collectors. It’s a really important part of bankruptcy law. If you’re facing money troubles and need help quickly, talking to a bankruptcy lawyer who knows all about the Automatic Stay can be a big relief.

Start Fixing Your Debt Today If you’re stuck with debts that feel too big, especially if you’re worried about losing your home or wages, you should look into bankruptcy options. Because we focus only on bankruptcy law, our expert lawyers at Wright Family Law Group are here to help you understand your rights and guide you through the bankruptcy process if it’s the right choice for you. Reach out for a free consultation today to get on track and reclaim your financial freedom.

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