Greatest Bankruptcy Weapon: The Automatic Stay

The Debtor's Greatest Weapon, The Automatic Stay

Immediately when your bankruptcy case is filed, an
automatic stay is created.  An automatic stay is the
equivalent of a restraining order that prevents creditors
from taking certain collection actions against you.  These
collection actions include: Telephoning you at home, at
work or on your cell phone; Filing lawsuits against you or
continuing with lawsuits that are already in progress;
Repossession attempts; Foreclosure proceedings; Wage or
bank garnishments; Recording any liens or judgments;
Anything 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

There are exceptions to the automatic stay, especially in
the case of re-filings. Creditor actions are not stayed in
the following circumstances: Criminal actions.  Filing a
bankruptcy case will not prevent Federal, State or local
authorities from pursuing their criminal action against
you. Lawsuits involving child support or spousal support
are not stayed and can be pursued despite your bankruptcy
filing. Actions by governmental units to enforce a police
power are not stayed.

Recent Changes

There are many changes that have occurred in the area of
automatic stays since bankruptcy reform generally went into
effect October 17, 2005. The major changes have to do with
repetitive bankruptcy filings. If you file a second
bankruptcy case within one year of a prior filing, the
automatic stay will only go into effect for thirty days,
unless you can prove to the court that the second filing
was filed in good faith.  You must file a motion and have
it heard before the Judge, prior to the expiration of the
thirty day period.  The motion can be brought against one
particular creditor, or more likely, against all creditors.
 After notice and a hearing, the court will rule one way or
another.  You have the burden of proving that the second
case was filed in good faith.  This can be accomplished by
showing a positive change in your circumstances such as
higher, more stable income.  Another example would be if
you recovered from a serious medical condition which had
previously prevented you from gainful employment. If you
file a third bankruptcy case within one year of two prior
filings, the automatic stay will not go into effect at all.
 You can attempt to invoke the automatic stay by bringing a
motion, similar to the one mentioned above, showing that
the third filing was made in good faith.  Although not
impossible, it would require a very compelling reason to
convince the court to allow the stay to be imposed on a
third filing within one year. In eviction cases, if the
landlord has already obtained a judgment for possession
prior to the bankruptcy case filing, then there is no
automatic stay.  You should file your bankruptcy case prior
to the landlord obtaining a judgment so that the stay can
go into effect. There is also no stay if the eviction is
based upon endangerment of the rental property or an
illegal use of controlled substances is occurring on the
premises and the eviction started prior to the bankruptcy
case being filed.


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David M. Siegel is the author of Chapter 7 Success: The
Complete Guide to Surviving Personal Bankruptcy. He is a
member of the American Bankruptcy Institute and currently
practices bankruptcy law in Chicago and its surrounding
suburbs. Additional information is available at
http://www.bankruptcy-lawyers-dallas.com .