The Automatic Stay Described
What is the Automatic Stay in Bankruptcy?
It is relief! It’s a stop sign. It is an Order from the Federal Court telling your creditors to quit trying to collect.
Generally, this is the relief that many people are looking for. It’s when the lawsuits cease, the harassing calls stop, and the letters threatening collection efforts arrive no more. It’s the law and there are dire consequences should the creditors disobey it. Often, when clients ask how long does “it” take, they are referring to this very notion, how long before all the collections stop, the garnishments cease, and the lawsuits are no more. The Automatic Stay starts as soon as you file the case in bankruptcy court. For more information on the notion of “how long does it take”, please click here.
Under Section 362 of the Bankruptcy Abuse Prevention and Consumer Protection Act, filing bankruptcy provides immediate relief from most actions that can be taken by creditors to collect debts. This includes collection calls, billings, filing lawsuits, or most other forms of collection efforts unless the creditor files a motion with the Court, and obtains permission to do so. Generally, this is referred to as “Relief from the Automatic Stay”, meaning the creditor seeks relief from what is otherwise an obligation, and the Court does not hand them out easily.
Collection notices must stop, lawsuits cannot be continued, judgments cannot be taken, and garnishments cannot be pursued.
An exception to the Stay is if you have deposits with a creditor the creditor can “set off” what it owes you (i.e., the amount of your deposits) against what you owe it. Therefore, if you owe your bank or credit union money it is best to have as little as possible in the account on the date you file.
Loans against retirement. Withholding from the debtor’s wages and collection of loan amounts due as a result of the debtor’s borrowing from an employer-sponsored pension, profit-sharing, stock bonus, or other plans recognized by the IRS as tax-exempt.
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By: Guss Markwell
O’Fallon, MO 63366