Filing for bankruptcy typically triggers what is called an “automatic stay.” In most cases, the moment a bankruptcy petition is filed, an automatic stay goes into effect and remains in effect for the duration of the case. The automatic stay prevents creditors from taking certain collection actions. Creditors cannot:
- Take any action against the debtor or the debtor’s property to collect any debt
- Enforce any lien on the debtor’s real or personal property
- Repossess any property in the debtor’s possession
- Discontinue any service or benefit currently being provided to the debtor
- Take any action to evict the debtor from his or her residential dwelling
More specifically, the automatic stay prevents a creditor from foreclosing on a debtor’s home, repossessing a debtor’s vehicle and garnishing a debtor’s wages, among other actions. An experienced Morris County bankruptcy lawyer understands the effects and limitations of the automatic stay and can explain your rights under the Bankruptcy Code.
The Motion to Lift Stay
A creditor who takes any collection action barred by the automatic stay while the stay is in effect violates the automatic stay. Creditors who violate a bankruptcy stay may be subject to sanctions. If a creditor wishes to resume collection activities, the creditor must file a motion with the bankruptcy court requesting that the judge lift the automatic stay. If the bankruptcy judge grants the motion and lifts the stay, only then can the creditor resume collection efforts while the case is pending. When such a motion is granted, the stay only lifts for the creditor who filed the motion – the stay remains in effect for all other creditors. Depending on the circumstances of each particular case, a debtor may be able to defend against such a motion or reach an agreement with the creditor to leave the stay in place under certain conditions.
A qualified Morris County bankruptcy attorney helps debtors protect their rights when a creditor violates the stay or files a motion to lift the stay.
The Automatic Stay Is Not Always Automatic
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) limits the bankruptcy stay in certain situations. BAPCPA stipulates that in most cases, if a debtor files a Chapter 7, Chapter 13 or Chapter 11 bankruptcy case within one year of a previous case being dismissed, the automatic stay goes into effect for only 30 days. It further stipulates that in most cases, if a debtor files a third bankruptcy case under Chapter 7 , Chapter 13 or Chapter 11 within one year of two prior cases being dismissed, then no automatic stay goes into effect when the third case is filed.
Bankruptcy is a financial tool that allows people who are struggling with debt to obtain a fresh start. BAPCPA attempts to prevent “serial filers,” people who file multiple cases to use the bankruptcy stay as a means of preventing creditor collection. Limiting the stay when more than one bankruptcy case is filed within a one-year period discourages serial filing.
Debtors who file more than one bankruptcy case within a one-year period, and who file the second or third case in good faith, are not without options, however. Debtors who file a second case can request that the bankruptcy court extend the stay for the pendency of the case. Debtors who file a third case can request that the bankruptcy court impose a stay. If the debtors demonstrate they filed the second or third case in good faith, that is, they are not merely using bankruptcy to prevent creditors from exercising their right to collect, and if they explain how they plan to be successful in completing the second or third case, the bankruptcy judge may agree to extend or impose a stay. A knowledgeable Morris County bankruptcy lawyer can help debtors file the appropriate motions when the stay is limited to 30 days or does not go into effect at all.