Automatic Stay of Bankruptcy

What is the Automatic Stay of Bankruptcy?

The Automatic Stay of Bankruptcy is an injunction that immediately stops lawsuits, foreclosure, garnishments, and most collection activity against the debtor the moment a bankruptcy petition is filed. This automatic stay is the equivalent to a restraining order that prevents creditors from taking certain collection actions against a debtor.

These collection actions include: repossessing vehicles, foreclosing on homes, telephoning you, sending you collection letters, filing lawsuits against you or continuing with lawsuits that are already in progress, repossession attempts, wage or bank garnishments, recording any liens or judgments, or anything else that attempts to collect a debt or improve a creditor’s position as it relates to you and your underlying debt.

The Automatic Stay is Not Absolute

The automatic stay is not absolute and creditors are given the right to file a Motion with the bankruptcy court requesting the stay to be “lifted”. By having the “stay” lifted then creditors are free to pursue their collection activities.

For example, an auto finance company can file a Motion to Lift the Automatic Stay if a debtor is delinquent on their car your payments. In those cases, the creditor will be granted its relief and will be permitted to recover the collateral despite the bankruptcy. So if a debtor does not continue to make the car payment after the bankruptcy has been filed then you may have your vehicle repossessed.

Also, the automatic stay will only provide temporary relief if you are not making your mortgage payments. As far as general creditors and unsecured creditors, the automatic stay will continue until the case is discharged.

municipalities and money owed

Additionally, the automatic stay does not prevent Federal, State or local authorities from pursuing criminal action. Furthermore, lawsuits involving child support or spousal support (alimony) are not stayed and cannot be discharged in bankruptcy.

If you need help from an Arizona Bankruptcy Attorney then contact the Dunaway Law Group at 480-389-6529 or message us HERE.