Bankruptcy Automatic Stay Stops Creditors

Are creditors threatening to take your money or property? If you are facing

  • harassing collectors,
  • lawsuits,
  • garnishment,
  • repossession, or
  • foreclosure

the attorneys at Cohen and Cohen can stop these with a bankruptcy. A bankruptcy will immediately put in place the automatic stay. The automatic stay is a bankruptcy law which protects you and your property from being taken by creditors.

The Automatic Stay

The moment your bankruptcy case is filed the automatic stay stops collection and legal activity. This means your creditors must stop pursuing you and any further actions by them would be illegal.i You may then reorganize your finances in a Chapter 13 Bankruptcy or quickly discharge your debts in a Chapter 7 Bankruptcy without the pressure from your creditors. Once your bankruptcy is complete a discharge is entered. The discharge permanently stays your creditor’s legal actions and provides you with a fresh start.ii

The Automatic Stay Stops Collections

Collectors are one of the worst aspects of falling behind with a creditor. They are trained to harass and berate you in order to try and get any money as quickly as possible. Collectors understand that when a person falls behind there may be limited resources. They will do whatever is necessary to try and take those resources even if it means you cannot afford food, shelter, and other basic necessities.

Bankruptcy stops all collector contact, such as collection calls or letters, and absolutely stops any actions being taken by collectors to take your money or property. As soon as the bankruptcy is filled, the Bankruptcy Court will send an official letter evidencing your filing to the collectors and they must stop contacting you or they will be violating the automatic stay.

The Automatic Stay Stops Lawsuits

If a creditor decides to file a lawsuit against you, then filing a bankruptcy will immediately stop the lawsuit. The automatic stay makes it illegal for a creditor to pursue a lawsuit and makes any judgment obtained after your bankruptcy filing void.

Your lawsuit will be stopped by your bankruptcy attorney after the filing of your case. Once the case is filed the Bankruptcy Court will send an official letter to the attorneys or creditor handling the lawsuit. In addition, if there is a court date that needs to be stopped quickly, then your bankruptcy attorney can immediately put the creditor on notice of your filing and in most cases stop you from having to appear in court.

There are few exceptions to the automatic stay stopping a lawsuit. However, they are worth mentioning in case they apply to your situation. Here are some common examples of legal proceedings the automatic stay will not stop:iii

  • criminal legal proceeding
  • establishment of paternity
  • legal proceeding for child support or spousal support
  • child custody or visitation proceedings
  • divorce except to the extent the divorce is determining the division of property
  • proceeding in regards to domestic violence
  • suspension or restriction of a driver’s license, recreational license, or professional license

The Automatic Stay Stops Garnishment

In most cases a creditor must file a lawsuit, receive a judgment, and then request a Writ of Garnishment in order to take money from your bank account or garnish your paycheck. However, certain creditors, such as the IRS or Student Loans do not need to take you to court. Regardless, filing bankruptcy will stop even these creditors from further garnishment and collections.

The Automatic Stay will stop a garnishment at any point. If you are concerned you will be garnished shortly or have already been garnished, then the bankruptcy filing will put an immediate stop to any further money being taken. In certain circumstances your bankruptcy attorney can even get your money back. If it is important to stop a garnishment right away, your bankruptcy attorney can file your case and immediately get in contact with the appropriate people to stop any further garnishment.

The Automatic Stay Stops Repossession and Foreclosure

The Automatic Stay can also help you postpone or stop the repossession or foreclosure of your property. A creditor who has a secured interest in your vehicle and wants to repossess the vehicle can no longer do so after the bankruptcy is filed. A creditor who wants to foreclosure on your house is in the same situation and any sale must be stopped immediately.

Filing bankruptcy gives you options. Bankruptcy will allow you to

  • hold onto your car or home until you can negotiate or modify your agreement with the creditor,
  • surrender them at a later date so you may replace a car or move before repossession or foreclosure occurs, or
  • get caught up on payments in a bankruptcy payment plan so you can keep your property.

In addition, you may take advantage of bankruptcy laws such as:

  • Redemption, which allow you to walk away from your current car loan and finance the car at its current value and a lower payment.
  • Cramming, which allows you to pay only the current market value of your vehicle during bankruptcy and keep the vehicle after your bankruptcy is complete.
  • Lien Stripping, which allows you to remove a second or higher mortgage from your home.

Taking the Next Step to Stop Creditors

The next step is to meet with a bankruptcy attorney at Cohen and Cohen to protect your interests, determine alternatives, or file a bankruptcy to stop collections, lawsuits, repossession, or foreclosure.

We Can Help You Protect Your Interests

At Cohen and Cohen, we can help you understand your options, make important legal decisions, and will provide you with professional representation.

Speak to the Bankruptcy Attorneys at Cohen and Cohen to see how our experience can help you.

To schedule an initial consultation to review your case with a Colorado Bankruptcy Attorney at our convenient central Denver location call 303-933-4529.

i 11 USC 362(a) – Automatic Stay

ii 11 USC 524(a)(2) – Effect of Discharge

iii 11 USC 362(b) – Automatic Stay