The Automatic Stay: What Is It And Why You Don’t Want To Lose It!

By Kenneth Lenz, Board Certified Consumer Bankruptcy Attorney

When a bankruptcy is  filed the debtor gets an automatic stay.  The stay is a very important. It prevents your creditors from continuing any attempts to collect on the debts that are owed.

While in place,  the creditors can’t:

  • Call you in an attempt to collect on a debt;
  • Send you letters or other correspondence to collect on a debt;
  • File a lawsuit against you, or if a lawsuit has been filed, the creditor can’t continue with the lawsuit;
  • Start or continue a foreclosure proceeding; or,
  • Garnish wages.

If a creditor does attempt any collection actions while the stay is in place, then the creditor runs the risk of a court awarding you monetary damages and attorney’s fees for violating the stay.

Under most circumstances it remains in place for the life of your case.

How can you lose your stay?

The most common way that a debtor loses it is by not making the monthly payments on his secured debts that are required in his Chapter 13 Plan.

If the post Chapter 13petition plan payments are not made then, the creditor will normally file a Motion To Lift Stay.  If the court does grant the motion, then the creditor can resume its collection actions.

Another way that an automatic stay can be lost is when a case is dismissed and refiled within one year.

When a case is filed within one year of a dismissed bankruptcy, the stay is not automatic.  Instead, the it remains in place for only 30 days unless a motion is filed requesting that the court continue it through the life of the case.

While less common, a secure creditor in a Chapter 7may also file a motion to lift the stay.

During a bankruptcy, it is important to tell your attorney about any problems you have either with creditors contacting you or with difficulty in making plan payments.

An experienced bankruptcy attorney can take action to protect your rights.