The automatic stay is one of your most powerful tools when you file a bankruptcy. It’s the law that automatically goes into effect immediately when your bankruptcy case is filed, stopping all collection activity against you and all your property.It stops collection calls and letters, repossessions and foreclosures, garnishments, lawsuits – virtually anything a creditor can do to collect on a debt or take possession of collateral.
WHY ARE THERE EXCEPTIONS TO THE AUTOMATIC STAY?
Congress has simply decided that some kinds of legal procedures should not be stopped by the filing of a bankruptcy case, and that your creditors or adversaries should be able to take certain specific actions in spite of your filing. It’s important to be aware of these exceptions so that you are not caught by surprise.
The following special kinds of creditors or adversaries CAN act in the ways stated here even after you file bankruptcy:
- A district attorney or other kind of criminal prosecutor can bring a criminal case against you, or can continue prosecuting an ongoing one. This means that, among other things, an indictment could be issued against you, a criminal trial or sentencing hearing could continue, and virtually anything to do with criminal proceedings can go forward. We are not just referring here to felonies or serious misdemeanors, but also to more routine matters like traffic violations that you might not think of as criminal.
- Your ex-spouse, about-to-be ex-spouse, your child, or some person or governmental agency acting on their behalf can start or continue certain kinds of divorce and family court proceedings. These include procedures to establish paternity of a child, determine or change the amount of child or spousal support to be paid, settle child custody or visitation issues, address domestic violence disputes, and even dissolve the marriage. On the other hand, a marriage dissolution proceeding cannot start or continue IF it involves the division of assets or debts between the spouses, because then it would violate the automatic stay.
- With child and spousal support or alimony particularly, collection of ONGOING support can continue. As for any BACK support, collection of it can also start or continue in spite of your filing of a Chapter 7 case. This includes not just wage withholdings and garnishment of bank accounts, but also seizure of tax refunds and suspensions of driver’s and occupational/professional licenses. In contrast, all collection of BACK support IS stopped by the filing of a Chapter 13 case, which proposes to pay that BACK support, and collection cannot continue as long as the debtor is both making those payments and keeping current on any ongoing support.
- The IRS and other tax authorities can start or complete a tax audit, can send you notice that you owe taxes, can demand the filing of your tax returns, can assess your taxes and demand that you pay them, and in some limited situations can even file tax liens against you and your property.
As you can see, all of these exceptions apply only to certain special kinds of creditors and/or debts. It is important to be aware that the automatic stay DOES stop most collection actions against you by most creditors. In practical terms, for most people filing bankruptcy ALL collection action is stopped for ALL of their creditors. So unless you are involved in a court proceeding with, or are the target of collection efforts by, the criminal or tax authorities, or by an ex-spouse or support enforcement agency, none of the exceptions will likely apply to you.
For protection from your creditors if you are in the Dallas-Fort Worth area, please contact us at The Law Offices of Roger Fuller so we can show you how to get the best use out of the automatic stay to meet your unique needs. Schedule your free and confidential consultation either by calling 214-516-6187 or by reaching us here.