What is the Georgia and Federal Bankruptcy Stay?
A bankruptcy stay, also known as an automatic stay, is a legal process that prevents any lawsuit filed against you and a majority of legal actions against your property by creditors, collection agencies, or government entities. A bankruptcy stay prevents these types of collectors from pursuing you for the debt owed and from attempting to collect by legal means. Bankruptcy stays can also protect your property from being foreclosed on, prevent legal actions by child support enforcement, allow for you to retain utility services, protect your welfare checks, protect your unemployment benefits, or protect your job / income from garnishment during financial hardship. A bankruptcy stay will begin the day that a bankruptcy petition is filed. The bankruptcy stay is often called the “Automatic Stay” because it is a court order that automatically goes into effect the moment a bankruptcy case is filed with the court, whether the creditors know about it yet or not.
What Can a Bankruptcy Stay Prevent?
Utilities Being Cutoff, Foreclosure and Eviction
A bankruptcy or automatic stay can protect you from the most unpleasant circumstances of financial hardship and can effectively aid you in recovering from some debt during the bankruptcy process. Most importantly a bankruptcy stay can ensure your fundamental needs such as shelter and access to basic utilities. During an automatic stay your utility services will not immediately disconnect if you are late paying your water, gas, electric, or telephone service. Once an automatic stay is obtained then the utility provider will provide the person responsible for the bill at least 20 days prior to the services being disconnected. Furthermore, an automatic stay can prevent against immediate eviction and foreclosure. During a foreclosure the automatic stay will temporarily stop the foreclosure proceedings and force the creditor to provide additional time before the home is foreclosed on. In some situations an automatic stay will help, but many new bankruptcy laws make it easier for landlords to continue with the eviction process. At most an automatic stay in an eviction case can buy you a few days or a week or so, it really depends on how long it takes the landlord to ask the court to remove the stay.
The Garnishment of Wages and Public Benefits
A bankruptcy stay can also end the collections process that may occur against public benefits or wage garnishments. In situations where the individual receives public benefits then collection agencies can collect on over payments or garnish funds out of future checks. However, a bankruptcy stay prevents collection agencies from garnishing these types of funds. A bankruptcy stay also has the ability to prevent multiple garnishments of the work salary and may allow for some of the debt to be discharged as a part of the bankruptcy process. Filing a bankruptcy stay allows for you to take home your total earnings and places limitations on how much of your check can be taken to account for court judgments. Generally, 25% of your monthly wages can be garnished for judgments and 50% to satisfy child support or alimony payments which cannot be discharged.
What can a Bankruptcy Stay not Prevent?
Automatic or bankruptcy stays cannot prevent collections in all situations. There are a select number of cases in which an automatic stay will not circumvent the collection process: some tax proceedings, legal support actions, loans from a pension, criminal proceedings, and multiple filings of bankruptcy.
IRS and Georgia Department of Revenue: Certain Collection Activity for Taxes
In terms of tax related cases the IRS in the presence of an automatic stay can still carry out particular actions; such as, an audit, tax deficiency notice, request / demand of tax return, demand of assessment payment, and issuance of a tax assessment. In tax related situations however, an automatic stay can prevent the IRS from obtaining a tax lien or seizing property or income. In all situations any attempts by the IRS to collect for producing a tax assessment will be upheld.
Civil Contempt and Criminal Lawsuits
In lawsuits of contempt for criminal and support actions a bankruptcy stay will not prevent collections of monetary funds. In no circumstance will a case concerning child support or alimony be stopped by filing for bankruptcy. A judge may however decrease the amount of support owed in light of the filing for bankruptcy – which would take place following the bankruptcy stay and not be retroactive. During a criminal proceeding the debt can be divided from the criminal part of the automatic stay, meaning you may not be required to pay the fine, but you would still be required to serve jail time or community service. However, the bankruptcy stay will usually stay contempt proceedings directly related to suits that are subject to the bankruptcy stays – such as credit cards suits and breach of contract suits.
Loan Repayment from Pensions – IRA’s
Any form of loans from a pension plan will not be stopped during an automatic stay. In these types of situations money can still be withheld from your accounts, income, public benefits, etc. to repay the loan in particular forms of pensions. This type of repayment is typically required in employment associated pensions and many forms of IRA’s.
Collection Activity After Multiple Recent Filings of Bankruptcy
Lastly, and automatic stay or bankruptcy stay will not prevent collections in situations in which the individual filed for bankruptcy during the previous year. In these situations the automatic stay can be lifted after thirty (30) days and the debts can still be collected. However, you, the trustee, the U.S. trustee or a creditor can dispute for the stay to continue if they believe that the current bankruptcy was filed in good faith. In any bankruptcy case in which it was determined that you acted in bad faith by the court it will be assumed that the current case may in fact be the similar result of bad faith and you will need to overturn the courts presumption to maintain the automatic stay in your current bankruptcy case.
Can Creditors Still Collect During an Automatic Stay?
Like many other situations the creditors do have access to loopholes which allow them to attempt to collect even in the presence of an automatic stay. In many situations a creditor may get around the automatic stay by simply requesting that the bankruptcy court “lift” the stay. Generally the court will accept this “lift” of the automatic stay as long as the creditor can demonstrate that the stay is not serving its intended legal purpose. This type of legal action is also referred to a Motion for Relief From Automatic Stay and is generally accepted if not defended by a continuance of the automatic stay or bankruptcy stay. More Information >>
If you are facing bankruptcy and need advice from an experienced team of bankruptcy attorneys, call us today at 770-609-1247. We have filed over a thousand successful bankruptcy cases helping hundreds of local residents residing in metro-Atlanta, Alpharetta, Cumming, Roswell, Milton, Johns Creek, Marietta and surrounding cities.