For many, filing for bankruptcy is a difficult decision, as there are a number of important considerations you must make during this process. However, it’s important to understand that one of the primary benefits of filing for bankruptcy is that you are granted what’s known as an automatic stay. However, it’s also important to note that the automatic stay can be lifted in some circumstances. The following blog explores what you should know about these matters, including the importance of working with Franklin County bankruptcy lawyers to help you navigate these difficult times and protect your rights.
What Is the Automatic Stay?
When you file for bankruptcy, you will be granted something known as an automatic stay. Essentially, this stops all collection efforts against you, including lawsuits, wage garnishment, foreclosures, and even communication regarding an owed debt.
The purpose of the automatic stay is to allow the filer the opportunity to reorganize and repay their debts as they are formally under the supervision of the bankruptcy court. As such, the stay will only last as long as their case. This means those who file Chapter 7 will only have around six months of protection, while those who pursue Chapter 13 will find the stay lasts three to five years. Once the case is formally closed by the court, the stay will be lifted, and creditors may resume collection efforts.
You should also note, however, that only debts that were not discharged during this process can be collected following the closure of your case. Once a debt has been discharged, your legal obligation to repay the debt is dismissed, and creditors can no longer attempt to collect on a discharged debt.
When Can the Courts Lift an Automatic Stay?
First and foremost, it’s important to understand that some debts are not protected under the automatic stay, and you must continue to pay them even after you’ve declared bankruptcy. This generally includes any debts that are the result of a family law matter, like alimony or child support, or debts incurred as a result of criminal actions, like fines and fees to the state or victim restitution.
It’s important to understand that while creditors must cease all collection efforts against you during this process, there are some instances in which the automatic stay can be lifted by the courts so a creditor may continue to pursue collection efforts. However, you should note that this process is complex, as the court will consider a number of factors before lifting the stay.
If a creditor wants to continue collection efforts against you, they must begin by filing a motion with the court explaining why they are seeking the court’s action. In some instances, this is because the debt is secured, meaning the collateral can decrease in value over time. If you fail to make payments, the creditor can ask the court to lift the stay to repossess the property so they do not suffer financial harm.
When you are ready to file for bankruptcy, it’s in your best interest to work with an experienced attorney to assist you during this process. Not only can we help you navigate the filing process, but we can also help you through these difficult times if a creditor petitions the court to lift the stay. When you need help, our firm is here. Contact us today to learn more.
