Understanding the Automatic Stay Option
When medical bills, credit card debts, and other financial burdens have become overwhelming, you may be considering bankruptcy. If you are afraid that filing bankruptcy will mean that you lose your car, home, or other property, you’ll be happy to learn that there are numerous protections in place for consumers who file for bankruptcy. One of which is the automatic stay option.
Consumer Protection in Bankruptcy
Georgia law allows consumers filing for bankruptcy to claim exemptions for certain property, but this may not be enough to protect all of your property. Thankfully, federal law grants those who file for bankruptcy an automatic stay. This means that most debt collection actions must stop immediately once the bankruptcy petition is filed. This includes repossession of vehicles, home foreclosure, and wage garnishment. The automatic stay option is in place from the second the petition is filed, and creditors can be considered in violation of the stay, even if they have not been notified of your bankruptcy filing. However, this is only temporary and expires when the bankruptcy case is closed, at which point creditors must adhere to the decisions made in the bankruptcy case, or dismissed, at which point collection efforts can begin again.
Limits to the Automatic Stay Option
Although the protection of the automatic stay option can give you breathing room, it is important to note that the automatic stay does not apply to every possible debt. The Georgia Department of Revenue may still take action against you for certain tax debts, even demanding payment.
If you have filed for bankruptcy before, your access to the relative safety of the automatic stay may be limited. If your previous bankruptcy petition was filed and dismissed within the last year, your automatic stay protections will only last for 30 days, unless extended by a judge. The stay is not granted at all if this is your third filing within a one-year period, and your previous petitions were dismissed.
Although the law primarily focuses on protecting consumers, there is some allowance for the rights of creditors to collect the debt. Creditors can petition the court for a relief from the automatic stay, which would allow them to pursue collection of the debt. However, in order to get permission to proceed, the creditor has to prove that the stay will cost them money and will not benefit or harm other creditors.
Common situations in which judges may lift the stay include:
● Foreclosure or other secured debt in which your equity is not sufficient to make future payments
● Landlord/tenant disputes, including eviction
● Involvement in a separate legal case
If a judge does award your creditor relief from the automatic stay, you do not have to resign yourself to losing your property. There are still other legal options available to you to protect your assets. The relief from the stay only allows your creditors to pursue collection options normally allowed by law. It does not automatically grant them ownership of any property and does allow you to pursue normal protections, as well.