You feel the shudder travel through your body and the tension hit as the phone rings. There is no need to check Caller-ID because you know it is a creditor. They call incessantly all day and into the evening. You have stopped checking the mailbox because it is simply filled with one reminder after another of your financial desperation. When you pull up to your home, you look carefully up and down the street for process servers lying in wait to serve you with a lawsuit filed by a creditor. You have long since stopped leaving money in your bank account knowing that it might be levied at any time. It may feel like there is no way out of this insanity, but relief is much closer than your realize.
When you file bankruptcy, there is a court order that automatically goes into effect upon the filing of a bankruptcy. This court order is called the “automatic stay.” The automatic stay stops most debt collection efforts and keeps them at bay once you have filed for bankruptcy relief. While the bankruptcy is pending, most creditors cannot take any further action against you. This means that the harassing phone calls, collection letters, wage assignments, bank levies and civil lawsuits all stop.
The purpose of the automatic stay is to give a person some breathing room from one’s creditors and the financial pressure that created the need for a bankruptcy. The automatic stay prevents creditors from continuing collection action such as:
- Suing to collect on a debt
- Suing to seize personal property
- Suing to enforce a lien on real property
- Seizing property pledged as collateral on a debt
Sometimes a creditor can file a motion in court to have the stay lifted. This is called a Motion to Lift Stay. Other times a creditor can begin collection proceedings without seeking advance permission from the court. There are certain legal proceedings that are not stopped by bankruptcy, such as child custody cases, criminal proceedings, tax audits and proceedings to revoke a driver’s license.
Depending on how recently you have filed bankruptcy, the duration of the automatic stay can be fairly brief. If you have previously filed a bankruptcy case within the previous one-year period, the stay will expire automatically after 30 days. If two cases are dismissed in a year, there will be no protection from the automatic stay at all. For most creditor collection actions, the stay is effective and works to stop creditors dead in their tracks. This results in an end to harassing calls by debt collectors, threatening letters by attorneys, and lawsuits to collect payment for credit card and health care bills.
In a Chapter 7 Bankruptcy, the automatic stay also ensures that the trustee – not one’s creditors – will be responsible for ultimately deciding which property a debtor will be able to keep, which property they will have to give up as well as how the proceeds of any property will be distributed.
In a Chapter 13 Bankruptcy, the automatic stay can be a benefit because it provides co-debtor protection. A co-debtor who is liable with a debtor on a specific debt can be protected under a Chapter 13 filing. This protection will last as long as the debtor pays back the entire co-signed debt along with contract interest to fully protect the co-debtor.
Anyone who willfully violates the stay in the case of an individual is liable for damages caused by the violation and sometimes for punitive damages. Some courts confine the right to damages to individual debtors and deny damages for stay violations as to corporate debtors. If you need relief from crushing debt, it is important to seek the help of an experienced Kansas bankruptcy attorney who can help you file and make sure that your creditors get notice of the bankruptcy filing and the automatic stay. Creditor actions taken after the stay is in place are generally void or voidable. Actions taken by a creditor that are in violation of the stay have no legal effect. The sooner that you file the sooner you will be able to obtain financial relief.
At the Law Office of Weston Moore, we have been helping people in Olathe and throughout Johnson County for over 15 years. We offer a free initial case evaluation with Kansas City bankruptcy attorney, Weston Moore, so that we can assess your situation and help you determine whether bankruptcy is right for you. Call us today at 913-782-7075.