Bankruptcy Automatic Stay Explained
Can filing a Chapter 7 or Chapter 13 bankruptcy petition stop creditors from taking your property? The short answer to this question is “yes.” An automatic stay provisions of the Bankruptcy Code protect a debtor’s property from being seized, garnished, repossessed, or foreclosed without permission from the bankruptcy court. However, the bankruptcy automatic stay may not be “automatic” in all cases. Furthermore, the bankruptcy stay can be modified in certain circumstances.
It is important to speak with an experienced Texas bankruptcy lawyer about automatic stay law to ensure that you will receive all protections available under an automatic stay in bankruptcy. Call our law firm to schedule a free consultation with a bankruptcy lawyer in the Dallas-Fort Worth area.
What is an Automatic Stay in Bankruptcy?
What does automatic stay mean for you? The “stay” means that your creditors must stop all actions to collect a debt immediately upon being notified that a bankruptcy petition has been filed. Unless a creditor obtains court approval, it cannot resume collection actions while you are in bankruptcy. A very important purpose of the automatic stay in bankruptcy is to allow a debtor the time he or she needs to resolve debts in accordance with the laws outlined in the Bankruptcy Code without being pursued by creditors.
Whether you file under Chapter 13 or Chapter 7 of the Bankruptcy Code, the bankruptcy stay stops creditors from taking certain actions to recover debts.
What is a stay supposed to do?
- Stop Foreclosures
- Stop Repossession
- Stop Wage Garnishments
- Stop Collection Lawsuits
- Stop Creditor Harassment
- Stop Lien Attachments
An automatic stay in a bankruptcy proceeding is a very important protection offered to a debtor who is trying to reorganize debts. It is also just as important to a debtor who is seeking a fresh start after suffering a financial crisis that resulted in the inability to repay debts. The bankruptcy stay is just one of the benefits of filing bankruptcy our Texas bankruptcy lawyers will explain during your free appointment.
How Long Does the Automatic Stay Remain in Effect?
You can think of an automatic stay in Chapter 7 or an automatic stay in Chapter 13 like an invisible barrier that protects you from your creditors during your bankruptcy case. Without permission, your creditors cannot penetrate this barrier to seize your assets, harass or threaten you, or take your money. In most cases, the automatic stay remains in force and effect during the entire bankruptcy case. The stay goes into effect the moment your bankruptcy petition is filed and remains in effect until the court issues an order closing case.
However, there are instances in which the provisions of the automatic stay may be modified. For example, a Chapter 13 automatic stay may be modified to allow a mortgage lender to foreclose on a home that the debtor has voluntarily surrendered or has failed to pay the loan payments for the home.
In most cases, the bankruptcy stay remains in effect throughout the case to protect you from your creditors. However, if a creditor files a motion to modify the stay, your bankruptcy attorney can discuss how to fight a motion for relief from automatic stay and what happens after automatic stay is lifted.
What is Automatic Stay Modification?
A creditor can file a motion for relief from the automatic stay in either a Chapter 7 or a Chapter 13. We often see these motions more in Chapter 13 cases because most creditors simply wait to take actions in Chapter 7 cases until the case is closed. Creditors cannot take actions to recover debts that are discharged in bankruptcy, but they can foreclose and repossess assets with valid liens after the case is closed if the debtor fails to make the required monthly payments.
In Chapter 13 cases, motions to lift the stay are more common because a typical Chapter 13 bankruptcy plan has a 60-month term. A mortgage lender that is not receiving payments does not want to wait 4 or more years to file a foreclosure action. Therefore, the lender files a motion to lift the automatic stay. However, there are ways to fight a motion to modify. For example, if you have proof you made your payments, but the creditor did not post the payments correctly, you can provide proof of payment to the court as evidence and request the court deny the motion by the lender.
If you are behind on the payments, your bankruptcy lawyer may be able to work out an agreement with the lender to allow you to catch up the past due payments. However, if you miss a payment required by the settlement order, the automatic stay is lifted, and the creditor is permitted to proceed with any legal means of recovering the debt.
Understanding the Automatic Stay in a Bankruptcy Case in Texas
Our attorneys understand that the legal terms used in a bankruptcy case can be confusing, especially for anyone who has never dealt with a bankruptcy case.
Therefore, our Dallas and Fort Worth bankruptcy lawyers and the entire team of legal professionals at Leinart Law Firm take the necessary time to explain the bankruptcy terms you hear during your case and answer your questions about the bankruptcy process. We want you to feel comfortable with the process and your decision to seek debt relief through a bankruptcy filing.
Call (469) 232-3328 or (817) 426-3328 to request a free bankruptcy consultation with a bankruptcy lawyer in the Dallas-Ft. Worth metropolitan area.