The United States Bankruptcy Code provides for an automatic stay upon the filing of any bankruptcy petition. 11 U.S.C. § 362. The effect of the automatic stay is both immediate and broad. The stay halts law suits, stops sheriff sales and lien enforcement, attempts to garnish, repossess property or evict. With few exceptions, filing a bankruptcy case will halt any adverse legal action. In fact, section 362(k) of the Bankruptcy Code provides that debtors are entitled to damages for violations of the automatic stay and, when those violations are willful, a court can award punitive damages to the debtor.
In a Chapter 13 Bankruptcy case, a debtor might file a bankruptcy petition to prevent a sale and, under the provisions of Chapter 13, propose a plan to repay the mortgage arrears over a period of three to five years. In a Chapter 7 Bankruptcy case, the automatic stay could be used to prevent a judgment from getting entered against the debtor and, thereby avoid the fixing of a judgment lien on that debtor’s real estate. Also important to most debtors, the automatic stay prevents creditors from attempting to collect debts. This means that the harassing telephone calls from creditors and collection agencies will end.
From a logical perspective, the automatic stay must have broad application and be strictly enforced–otherwise the fresh start provided by a bankruptcy case would not exist, creditors would simply continue to attempt to collect upon their debts. The automatic stay provides debtors with breathing room.
How long does the automatic stay last? It ends when the debtor receives a discharge and the case closes but it can end sooner. A creditor can petition the bankruptcy court for relief from stay under section 362(d) of the Bankruptcy Code. Typically, an unpaid first mortgage creditor that will not be paid through a Chapter 13 plan will seek relief from stay to foreclose upon the debtor’s interest in the property subject to the mortgage. If a creditor is granted relief from stay, the stay is modified to the extent permitted by the Order of the Bankruptcy Court to allow that only that creditor to pursue its claims.
The automatic stay is one of the most important tools in the bankruptcy toolbox. To find out whether the automatic stay can help you protect your assets and interests in property, you should contact a Pittsburgh Bankruptcy Attorney for a free initial consultation.
(412) 925-8194
