People most commonly file bankruptcy in emergency situations. Whether they are about to be kicked out of their home, be found in contempt of court for missed payments, or have their wages garnished to satisfy consumer debt, they are in dire need of relief. An automatic stay will immediately halt all of the aforementioned actions and plenty others, but there are a few things that an automatic stay cannot prevent. Use this information to discover if you can benefit from the bankruptcy process.
What an Automatic Stay Prevents
Here are a few situations where an automatic stay can halt proceedings and give you an opportunity to improve your financial situation:
For those who are behind on utility payments and are receiving threats to have their water, gas, electricity, or telephone service cut off, an automatic stay can stall the action for 20 days. People rarely file for bankruptcy to resolve this issue alone, but it can be a major influencer depending on specific situations.
Evictions are more complex than other issues. Though an automatic stay can stop the eviction process for a few weeks or days, landlords can exploit some loopholes to carry out the eviction. If they can prove that you are endangering the property or using controlled substances there, the automatic stay will have little effect. This is also true if the landlord already had a judgment of possession before you filed for bankruptcy.
An automatic stay can temporarily stop a foreclosure, but it will often resume soon thereafter. The best way to keep your home during the bankruptcy process is to file Chapter 13 bankruptcy rather than Chapter 7.
Filing for bankruptcy does not only stop wage garnishments, but you may be able to discharge the amount owed. Neither creditors nor lenders can garnish more than 25% of wages to satisfy a debt, but individuals with multiple wage garnishments may benefit most from an automatic stay.
What an Automatic Stay Cannot Prevent
When you file for bankruptcy, an automatic stay will not affect the following:
Particular Tax Issues
Although the IRS cannot issue a tax lien or seize your property or income during the bankruptcy process, they can audit you. They can also send out a tax deficiency notice, which can ultimately lead to an audit.
An automatic stay will not halt criminal proceedings, but it can relieve you of financial obligations resulting from a court judgment. For example, if you were ordered to do community service and pay a fine as a result of your criminal case, you will still have to perform the community service, but not pay the fine.
The automatic stay will terminate 30 days after you file if you have a bankruptcy that is still pending from the previous year. If a creditor filed a motion to lift the stay, the courts would assume that you acted in bad faith. Either you, the trustee or the creditor will then have to prove that you filed the bankruptcy in good faith for the stay to continue.
Be sure to take all of these factors and more into consideration when pursuing bankruptcy. The bankruptcy attorneys at E. Orum Young Law Offices can help you decide if Chapter 13 or Chapter 7 is best for you and guide you through the process. Our firm has filed the most bankruptcies in Northeast Louisiana and would like to use our extensive experience to help you.
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