Florida Bankruptcy Law: What Is An Automatic Stay? Stop Creditor Harassment

The automatic stay in Chapter 7 and Chapter 13 bankruptcy is one of the most important tools available to borrowers. The automatic stay requires all collection activity against borrowers to stop immediately after a case has been filed. Creditors and collection agencies will not be able to pursue any collection actions when the stay is in effect. The automatic stay even stops garnishments and foreclosure auctions already scheduled to occur. For more information about the automatic stay or bankruptcy contact a Tampa bankruptcy attorney to schedule a consultation.

How Long Does the Automatic Stay Last?

In most cases, the automatic stay will remain in effect until your bankruptcy case is discharged. The automatic stay is available under both Chapter 7 and Chapter 13 bankruptcy. Typically, the stay is automatically lifted for all creditors once your case is closed. See bankruptcy case  Failla v. Citibank.

If a secured creditor wants to move forward with collection efforts after the stay has been enacted, the creditor must first seek approval from the bankruptcy court. This process will require notice to you (the debtor) and a court hearing. See U.S. Supreme Court Case: Citizens Bank of Maryland v. Strumpf. The automatic stay will prevent creditor harassment until it is lifted by a judge. If the judge grants the secured creditor the ability to move forward with their collection after the hearing, the automatic stay is considered to be “lifted” and collection efforts may resume.

Phone Calls & Notices From Creditors

Based on the legal tradition that parties represented by a lawyer cannot be contacted directly by the opposing party, the automatic stay ensures that only a judge can lift the automatic stay. Thus, the entire time a legitimate bankruptcy proceeding is going on, your creditors can no longer call, send you bills or notices, or otherwise contact you regarding the debt. Further, the automatic stay should remain in effect throughout the case. Only if a creditor obtains relief from the stay by a judge can collection actions resume during an active Chapter 7 or Chapter 13 bankruptcy.

Can a Bankruptcy Stop a Foreclosure Sale?

If there is an active foreclosure, the automatic stay will freeze the foreclosure as soon as the bankruptcy is filed. As long as the bankruptcy case is filed before the foreclosure action, the automatic stay will cancel the sale. Even if you file five minutes before the scheduled auction the foreclosure will be canceled.

It is important to make sure that once you file your bankruptcy petition to stop the foreclosure that you also file a “Suggestion of Bankruptcy” in the foreclosure lawsuit right away. This assures that the state court judge is on notice of your bankruptcy, so the foreclosure can be stopped on time. The Tampa bankruptcy law firm you hired should file the suggestion of bankruptcy in your foreclosure case on your behalf.

Will Bankruptcy Stop a Car Repossession?

The automatic stay is a common solution for borrowers seeking to stop car repossession in Florida. The automatic stay forces creditors to cease all collections attempts, include car repossessions. In this situation, timing is everything. If you expect to soon default on a car loan and need help with stopping repossession in Florida, it Is important to speak with a Tampa bankruptcy lawyer before your car is repossessed. Waiting too long to get started on the automatic stay may decrease the chances it can help. If the creditor obtains possession of the car before the bankruptcy is filed the automatic stay will not help to get the car back, it only prevents a creditor from taking the car.

What is the Quickest Way to Stop a Wage Garnishment?

The automatic stay is often the quickest way to stop a wage garnishment. Unlike the head of household exemption, you do not have to wait weeks or months to stop the garnishment. Instead, the garnishment must be stopped as soon as the bankruptcy case is filed. Conversely, the head of household process requires borrowers to wait for a court hearing in which a judge orders the garnishment to be stopped.

Automatic Stay Exceptions

The automatic stay does not apply to all types of debts and collection activities. A list of some of these automatic stay exceptions is below, for a more complete list see bankruptcy  11 USC §362 or contact a Tampa bankruptcy lawyer.

  1. Family support obligations: Many different forms of family support obligations will qualify for an automatic stay exception. For instance, child support payments and child custody cases are all exempt from the stay.
  2. Criminal court cases: The automatic stay will not delay or cancel the beginning or continuation of a criminal case. Bankruptcy is intended to address a debtor’s financial distress, not criminal activity. However, if the criminal prosecution is primarily based on debt collection the automatic stay may be placed on the criminal case. For instance, if the criminal prosecution is based on the debtor writing a bad check the bankruptcy stay may be enforced in the criminal case. See In Re Dovell.
  3. Tax bills: Demands for tax returns, and payment of taxes are eligible for an automatic stay exception. However, tax liens that would attach to the property of the bankruptcy estate will not take effect unless the debt is ineligible for a discharge and the property is transferred out of the estate or revested in the debtor.
  4. License suspension: The automatic stay will not prevent the debtor from attempting to reinstate a driver’s license that was suspended for reasons related to debt collection. However, license suspensions related to criminal proceedings will not be stayed subject to the automatic stay. See In Re Games.

How to Avoid an Automatic Stay Exception

Even though a debt is listed in the statute as being eligible for an automatic stay exception, the debtor may still be able to convince a court to pause the collection action and enact a stay. Bankruptcy courts are courts of equity. Therefore, the judge should consider the fairness of the relief sought, as opposed to just the strict rules of law.  Further, under Bankruptcy law 11 USC 105, the judge has the authority to issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of the law. The overriding principle behind bankruptcy is to give debtors a fresh start.  In some cases, an automatic stay exception can frustrate the purpose of debtors achieving a fresh start.

Questions? Contact a Tampa Bankruptcy Law Firm Today!

At Florida Law Advisers, P.A., the Tampa bankruptcy attorneys have years of experience helping people solve their financial problems. We understand that these are very difficult times and we are here to help. We have many options available that can help you successfully manage your debt and regain your financial health. The right course of action will depend on the unique circumstances of your case. To see which options may be available, contact us to schedule a free consultation with a Tampa bankruptcy lawyer.

Frequently Asked Questions

How long does the automatic stay last?

Can bankruptcy stop a foreclosure sale?

Will bankruptcy stop a car repossession?

Do both Chapter 7 and Chapter 13 bankruptcy have the automatic stay?

What is the quickest way to stop a garnishment?