When you file bankruptcy, lawyers will tell you that the automatic stay goes into effect on the day you file a bankruptcy. But what is the automatic stay? Our Bankruptcy Attorneys in Minneapolis like to think of the automatic stay as a shield that goes up between you and all of your creditors. The automatic stay is a law built into the bankruptcy code to protect you from the actions of your creditors. It is a very powerful law. It protects you from creditors: collection calls or billing, starting or continuing lawsuits, garnishing wages or levying bank accounts, repossessions of vehicles and foreclosures of homes.
THe Automatic Stay In Bankruptcy
The automatic stay is in effect for the length of your bankruptcy. This means that the filing bankruptcy in Minneapolis can prevent an imminent sheriff sale on a home. Even the day before its scheduled! Filing a bankruptcy won't put a permanent stop to the sale but it will delay the sale until after the bankruptcy is over or the creditor gets permission from the court to hold the sale. The same goes with repossessions of vehicles. The bankruptcy will prevent any immediate repossession, but unless you get caught up on payments to the vehicle lender, they can repossess the vehicle when you have gotten your bankruptcy discharge and the automatic stay has ended.
For any creditors to do anything while you are in the bankruptcy the creditors must get a judge's permission to lift the stay. This is pretty rare in a chapter 7 bankruptcy. Most creditors, like mortgage lenders and car lenders will wait until after the bankruptcy has been discharged to continue on with a foreclosure or a repossession. If you rent a house or apartment and file bankruptcy to stop an eviction, the bankruptcy will delay the eviction. Sometimes I do see landlords ask for the automatic stay to be lifted to continue with an eviction. The judges usually grant these requests, therefore you may be only allowed to delay in eviction for a couple weeks or a month, but it might not delay it for the full period you are in the bankruptcy, usually about three months.
For everyone else, like debt collectors, they are not able to lift the automatic stay. Once the bankruptcy has been discharged, a permanent injunction goes into place and they are not allowed to collect on the discharged debt. The automatic stay stops most everything but it doesn't have the power to stop criminal proceedings or family court proceedings.
Violations Of The Automatic Stay And Creditor Consequences
Violations of the automatic stay do happen. Usually the violations are an honest mistake. A collector will not have received the bankruptcy notice and will continue to bill you. These violations are easy to deal with. Your Minneapolis Bankruptcy Lawyer will send a second notice out to any collector that is continuing to call or bill on a debt. Most everyone that works with debt understands the automatic stay laws. Sometimes we will see creditors disregard the automatic stay and willfully violate the bankruptcy protections but it is rare. If this occurs the creditor is liable for actual damages caused by the violation and can be held liable for punitive damages. You would want to let your attorney know right away if you are continuing to receive phone calls or bills, and especially lawsuit paperwork after filing bankruptcy.
The Automatic Stay Will Protect You
The automatic stay does a lot to protect your rights and provide relief from your creditors. It will also most likely cause you some annoyance in terms of convenience. After your bankruptcy is filed you may find that you can no longer make payments through automatic bill pay or through online billing systems for your car loan or mortgage. You will also notice after about a month you aren't receiving the car note, mortgage statement or student loan statement in the mail. This is because of the automatic stay. As a said above creditors can not bill you, this means even the creditors you most likely will want to continue to pay on---the house and the car---cannot bill you either. Just because secured creditors don't bill you doesn't mean you don't owe on the collateral any longer. As long as you want to keep the house or car you must make payments on it. You will need to either mail in your normal monthly payment amount or call to see if they can process the payment over the phone. For at least the duration of the bankruptcy you will be locked out of online systems and normal monthly billings. Sometimes at the end of the bankruptcy, when you have received your discharge you can opt in to receiving bills again.
For student loans the automatic stay applies as well. For the length of your bankruptcy you will not be required to make student loan payments. The automatic stay prevents the student loan holder from billing you. Your loans will get put into deferment for the length of the bankruptcy. They will still accrue interest. You can make student loan payments while you are in the bankruptcy if you wish but you may not be able to make it automatically from your bank account or online. You may have to get more creative with how to send in the payment. Once the bankruptcy has been discharged your loans will come out of deferment and you will begin to receive your monthly student loan bills again. If you haven't been making payments on the student loans before filing bankruptcy, you won't be able to set up any payment arrangement until after your discharge. If you call your student loan provider they will not be able to provide you with much information until they see your bankruptcy has been discharged.
If you have questions on how the automatic stay would work in your bankruptcy case or other questions on bankruptcy don't hesitate to contact our office and let one of us walk you through what a bankruptcy would look like for your situation.
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