You file for Chapter 7 bankruptcy to get a discharge of your debts. You’re worried about how long it’s going to take for the case to go through the court system because you want to be rid of the problems as quickly as possible. The good news is that, in most cases, filing the case will give you most of the protection you’re looking for.
Your creditors want to be paid. They may be calling you regularly, or they may even have a lawsuit pending against you. If you file for Chapter 7 bankruptcy, the calls and lawsuits will stop immediately. It’s the magic of the automatic stay, perhaps one of the most powerful parts of the U.S. Bankruptcy Code.
The automatic stay prevents creditors from calling to ask for payment. It stops them from bringing or continuing a lawsuit against you. They can’t garnish your wages or repossess property. They also must stop any efforts to foreclose on your home. Though the automatic stay doesn’t stop the collection of debts from criminal proceedings, child or spousal support, or taxes pretty much everything else is off-limits.
The automatic stay will typically remain in effect until one of the following occurs:
- A judge grants a creditor’s request to lift the stay;
- The protected property is no longer part of your estate;
- You obtain a discharge; or
- A judge dismisses your bankruptcy case.
A court may limit the length of an automatic stay in certain situations, such as:
- You already filed for bankruptcy unsuccessfully within the last year.
- You’ve had a previous case dismissed for failing to file required documents without providing a valid reason.
- Your financial situation hasn’t changed enough to allow for a discharge now or for you to complete a bankruptcy plan.
You may be able to extend the stay in some cases, but that protection isn’t automatic. You’re going to need to come to the court with some significant proof of your good faith in order to get the benefit of the automatic stay. and if you’ve filed for bankruptcy more than once in the past year and haven’t been able to make it work, the automatic say won’t go into effect at all.
Remember, the stay has nothing whatsoever to do with whether a debt will be discharged in a Chapter 7 bankruptcy. Your student loans, for example aren’t normally going to be discharged. In spite of that fact, the lender can’t send you any bills during your bankruptcy case. The bank attachment has to end. The income execution is going to stop.
In the case of a non-dischargeable debt, the stay is only a brief period of breathing room. But for some, those few months may provide the opportunity they need to get back on their feet.
Image credit: Thomas Hawk
Jay S. Fleischman is a bankruptcy lawyer who sues creditors for violations of the automatic stay in bankruptcy. He also helps people correct credit report errors and defend against debt collection harassment.