If you are considering filing bankruptcy in Virginia, Maryland, or Washington, D.C., you should be aware of a nifty feature of the Bankruptcy Code called the Automatic Stay. Whether you file for Chapter 7 or Chapter 13, the Automatic Stay directs your creditors to cease all collection activities immediately or face court sanction. In short, the Automatic Stay immediately stops all creditor activity, including foreclosure, phone calls, garnishment, repossession, and lawsuits.
The Automatic Stay Immediately Stops All Creditor Activity
Contained in the bankruptcy code at 11 U.S.C. § 362, the Automatic Stay acts as a legal injunction, halting all creditor actions immediately at the moment the bankruptcy petition is filed.
Foreclosure. The Automatic Stay stops a foreclosure auction if your home is scheduled for a foreclosure sale. If the he mortgage company conducts the auction anyway, the sale is void ab initio, in other words, as if it never took place.
Lawsuits. If the creditor sued you prior to the bankruptcy, the lawsuit will be stopped (or “stayed”) pending the outcome of the bankruptcy. If you file bankruptcy prior to a lawsuit, the creditor may not sue you without first seeking permission from the bankruptcy court.
Repossession. If you still have possession of your vehicle, the Automatic Stay will prevent the creditor from repossessing it. Your bankruptcy legally enjoins the creditor from seizing the vehicle.
Collection calls or correspondence. While you are under bankruptcy protection, your creditors may not contact you or attempt collection on any debt. Once the Automatic Stay is in place, creditors cannot call your home, cell phone or place of work. Creditors may not send you mail in an attempt to collect on a debt.
Garnishment. Creditors cannot collect on judgments or pursue new collection actions. If the creditor has garnishmed your wages, the garnishment must stop immediately. While you are under bankruptcy protection, creditors may not lien against your property or levy your bank accounts.
Eviction. In most situations, the Automatic Stay stops eviction. Bankruptcy stops eviction in almost every case, but not if your landlord has already obtained a writ of possession.
The Automatic Stay Lets You Breathe Easy Again
When you’re facing legal action and time is running short, it’s not always easy to make the best decisions. Because the Automatic Stay immediately stops all creditor activity, you can catch your breath and think things through.
In short, the Automatic Stay buys you some peace of mind by immediately ceasing all collection efforts and creditor harassment. If a creditor, creditor’s attorney, or collection agent violates the Automatic Stay, then they run the risk of sanction by the Bankruptcy Court. Penalties for violating the Automatic Stay include monetary damages and attorney’s fees.
An experienced bankruptcy lawyer can explain to you how the Automatic Stay will work in your case. Get your creditors off your back. Give Lee Legal a call at (202) 448-5136.
