What Conduct does the Automatic Stay Stop and What Conduct it Doesn’t Stop

The filing of bankruptcy petition (chapter 7 or Chapter 13) automatically stops a lot of activity by creditors. Any creditor who doesn’t stop the activity may be subject to sanctions by the bankruptcy court. There are exceptions as noted below. If an exception doesn’t apply, then the creditor must formally ask the bankruptcy court for relief/permission to continue their conduct.

The main things that debtors should know is that once they file a bankruptcy, in most cases, they will be able to breathe, have time to plan their financial future and STOP the harassing phone calls and collection agencies. Collection agencies can no longer directly contact the debtor by calling them at work or at home. Creditors must stop all court case actions. All attempts to repossess your home or your vehicle must cease. The stay is primarily meant to give the debtor a chance to collect his thoughts.

Most creditors obey the stay. Most creditors will proceed to file claims through the bankruptcy court and then work with the attorney for the debtor and the trustee for the Bankruptcy Court.

These are some of the actions that are Stayed/Stopped

Debtors should know that the stay doesn’t permit the debtor to enter into new debts after they file the bankruptcy petition. The stay applies to these creditor actions that accrued before the bankruptcy was filed.

1. Any judicial, administrative or legal action against the debtor to attempt to get a judgment or to collect against the debtor – if the action could have been processed before the petition was filed. This means the creditor or collection activity has to stop what they’re doing (calling, writing, anything) and proceed through the bankruptcy court
2. Any attempt to enforce a pre-petition judgment against the debtor or against any property of the debtor. This means the creditor can’t get the local sheriff to come out to your house or residence and try to sell your assets
3. Any attempt to get possession of any of the debtor’s property. This includes foreclosure actions against the debtor’s home and repossession actions against the debtor’s care or secured assets
4. Any attempt to create, perfect or enforce a lien (a legal right possess property to pay for a debt) against the debtor’s property
5. Any attempt to create, perfect or enforce any lien acquired through a security interest in the debtor’s property. A security interest means the debtor put up collateral such as a home or a car to help get the loan. If the loan isn’t paid, the creditor can request that the collateral be sold
6. Any attempt to collect or recover money or property based on a claim against the debtor which began before the case was filed. Even debts occurred days before you file should be protected by the automatic stay
7. Any attempt to assert a setoff of any debtor obligation that began before the petition was filed
8. Some claims before the US Tax Court. Your Connecticut bankruptcy lawyer will tell you if your tax claim is protected by the stay

Actions that aren’t stayed

Some actions aren’t stayed when you file a bankruptcy. Most of these actions relate to making sure society is protected (that no crimes are committed) or that family members, especially children, are protected. These exceptions are best reviewed with your bankruptcy lawyer. As with most laws, there are usually some exceptions that may apply.

1. Crime Protection: Any criminal actions against the debtor
2. Family Matters: Any civil action to establish whether the debtor is the father of a child (paternity), any family support order obligations to provide for children, and any child custody and visitations issues. Divorce proceedings can proceed provided they don’t involve the division of property of the debtor. Spouses do need to get approval from the bankruptcy court to collect marital assets or force an equitable division of property. Cases involving protection from domestic violence may also proceed. The obligation to pay overdue support can be reported to proper child support agencies
3. Licenses: State actions involving the right of the debtor to drive a motor vehicle or the right of the debtor to keep or use a work related license or a recreational license
4. Medical obligations of the debtor
5. Some actions of the Trustee: such as perfecting an interest in the debtor’s property
6. Certain governmental regulatory or policing activities
7. Tax issues: Certain actions by a governmental unit to determine tax liability such as an audit, the request for tax returns or tax assessments. Intercepting tax refunds may be allowed
8. Commercial lease obligations: Certain non-residential lease obligations can be enforced
9. Education Actions: Certain education related actions such as actions regarding accrediting.
10. Where the debtor is ineligible to be a debtor for some reason: such as where the debtor filed a prior bankruptcy and the time to be allowed to file a new bankruptcy hasn’t expired.
11. When property was improperly transferred
12. Other exceptions your bankruptcy lawyer will know – too complicated to set forth here.

So take note of both these circumstances and the conduct that is acceptable by creditors and which conduct isn’t. When dealing with creditors there are a number of ways to ensure you protect yourself and note that if creditors don’t abide by the law, you can actually be compensated up to $1000.00 per incident. Your lawyer will have all this information and more for you.