During your bankruptcy case, creditors will be unable to take any and all collection actions against you, including contacting you, billing you, suing you, foreclosing or repossessing your car or home, or taking actions to enforce any court ordered judgments that a creditor may have received against you (i.e. garnishing your paychecks or bank accounts). It will even stop a pending lawsuit against you in its tracks.
The consequences of a creditor violating the stay include the award of actual and/or punitive damages to the debtor, including attorney fees and court costs. The court can undo any wrongful action taken by the creditor against the debtor, such ordering them to return their property.
There are some exceptions to this blanket protection, however. Creditors, in some cases, may seek a court order to “lift the automatic stay,” and allow them to either pursue their debt or collateral that secured by that debt.
Creditors are allowed by the court in certain circumstances such as when the debtor has collateral (i.e. a car or home) secured by debt for which the debtor is not paying, and the value of the property will decrease to the harm of the creditor and the creditor needs to regain possession of the vehicle quickly to avoid further harm to the value of the collateral. The court will also lift the stay in situations in which the debtor has not acted in good faith towards a creditor or in filing their case.
Certain creditors and actions are also not prohibited by the automatic stay. For example, creditors seeking domestic relations support (i.e. child support or alimony) are not prevented from pursuing support from the debtor. Criminal proceedings against the debtor will also not be halted by the stay.
Another situation in which a creditor may take action against a debtor despite the automatic stay is when the debtor’s landlord has already received a judgment for eviction against the debtor prior the filing of their bankruptcy case, or when the debtor has violated their lease agreement by damaging the property, or engaging in certain criminal activities thereon, in which case the landlord may pursue eviction against the debtor.
Notably, if an eviction is being pursued for non-payment of rent, and an eviction order has not been obtained prior to the date of filing for bankruptcy, any eviction proceedings will be temporarily halted until after the bankruptcy case is over.
This is a very generalized and brief overview of the law relating to the automatic stay and there are many nuances and exceptions to the general rules. When considering filing for bankruptcy, it is a very good idea to consult with an experienced bankruptcy attorney to see how bankruptcy, and the automatic stay, will apply to your particular case. See us at LifeBackLaw.com!
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