Filing a bankruptcy petition can offer numerous benefits for those experiencing financial difficulty. In the long term, the obvious benefit and main motivation for many in filing for bankruptcy is to obtain debt relief and get total debt under control. In the short term, soon after filing a petition for bankruptcy with the court, an automatic stay goes into effect, offering petitioners with relatively immediate relief from creditors and collection agencies.
An automatic stay operates as an order from the court which prevents creditors from collecting debts from a petitioner who has filed for bankruptcy. This protection goes into effect immediately after the bankruptcy petition is filed. Section 362 of the United States Bankruptcy Code lays out the rule governing automatic stays and identifies some exceptions to the protection. The automatic stay operates to protect debtors from certain actions by creditors, which include:
- Starting or following legal proceedings against the indebted individual that was filed before the bankruptcy case began.
- Enforcing a judgment gained prior to the start of the bankruptcy proceeding.
- Attempting to gain ownership of or possess control over the debtor’s property.
- Creating or enforcing any lien against the debtor’s property or creating or enforcing any lien against the debtor’s property involving a claim that arose before the commencement of the bankruptcy proceeding.
- Collecting or recovering a claim against debtor that started prior to the start of the proceeding.
- Collecting the setoff of any debt owing to debtor that arose before the bankruptcy petition was filed.
- Commencing or continuing a proceeding before the U.S. Tax Court for tax liability owed by the debtor for a taxable period that had ended before the date of the order for relief under the bankruptcy proceeding.
It is also important to note that in addition to the exceptions laid out by the rule itself, secured creditors may ask the court to exclude them from the automatic stay, if they can show good cause. In that case, the creditor must show that the automatic stay fails to give the creditor adequate protection or that is puts the creditor’s interest in the property in question at risk.
Let a Bankruptcy Attorney Help You
Struggling with debt is stressful and can be overwhelming with your phone constantly ringing with creditors at the other end, demanding payments that you just do not have. Filing for bankruptcy can stop these calls and put you back on financial track.
An experienced bankruptcy attorney can expand on the protections offered by the automatic stay and can also explain some of the exceptions to the protection. If you are considering filing for bankruptcy, you should contact a qualified bankruptcy lawyer in Clearwater, FL who can discuss your particular case with you.
Thanks to The Law Office of Michael A. Ziegler, P.L. for their insight into bankruptcy law and an automatic stay.