When the Automatic Stay Cannot Protect You?
Criminal prosecution is one action against which automatic stay cannot protect you. For example, if you were charged with writing a bad check and ordered to perform community service or pay a fine, a judge can lift the stay so you can complete these obligations. Likewise, it could be lifted if creditors secured collateral such as mortgage or car loan collateral they need to sell to recover losses.
Creditors may ask the court to lift the automatic stay in certain instances, such as continuing with litigation or protecting collateral at risk, or when necessary to protect their interests in an estate that has filed for bankruptcy protection. Any creditor found breaking this order without authority could face sanctions from the court, including having to cover attorney fees associated with the debtor’s defense attorney.
Adequate Protection Against Collection Actions
An automatic stay is invoked upon filing bankruptcy, providing immediate protection from collection activities like:
Furthermore, this breathing space gives debtors time to assess their finances and devise plans for paying or discharging their debt through bankruptcy petition proceedings.
An automatic stay can also help protect renters by stopping utility disconnections and preventing eviction actions. However, landlords may still file an eviction if rent that becomes due after filing for bankruptcy is unpaid—in such instances, the stay may need to be lifted temporarily while the bankruptcy process continues.
Halt Foreclosure & Eviction Efforts
As soon as the automatic stay has taken effect, all legal actions that could be used to collect debts owed will be stopped. It includes foreclosure proceedings, eviction lawsuits, and even discovery proceedings brought by creditors against you during bankruptcy cases.
- An automatic stay can give those facing mortgage foreclosure the time and opportunity to catch up on missed loan payments and potentially save their homes.
- Furthermore, it will prevent creditors from calling and initiating wage garnishment proceedings against you.
- Creditors may ask the court to lift a stay for various reasons. For instance, when car loan creditors believe your car’s value falls below what is owed, repossessing would not hinder their interests in bankruptcy estates.
