Automatic Stay: How To Use It In Bankruptcy To Protect Your Assets


Declaring bankruptcy is also often referred to as “filing for bankruptcy protection.” If you’re at the beginning of the bankruptcy research process, you may not fully understand why. You probably know that bankruptcy can help you clear away thousands of dollars in debt, but you will enjoy benefits from bankruptcy before your case is discharged. The Automatic Stay can help you protect your assets and give you peace of mind while your case is pending. Read on to learn more about how you can utilize the automatic stay to get the most out of your bankruptcy filing.

What is the automatic stay? Professional Bankruptcy Attorney Explaining What Is The Automatic Stay In Phoenix, AZ

Contact our Experienced Bankruptcy Attorneys with any questions regarding What is the Automatic Stay?

Bankruptcy Basics

It’s necessary to at least have a basic level understanding of bankruptcy to learn how to best utilize the automatic stay. The automatic stay goes into place when you file either Chapter 7 or Chapter 13 bankruptcy. In most cases, the stay lasts until debts are discharged, or the case is dismissed.

Chapter 7 is the most frequently filed type of bankruptcy. Chapter 7 bankruptcy liquidates and discharges debts, and typically takes about 4-6 months from filing to discharge. The Automatic Stay will be active during that time frame. To protect the Chapter 7 process from abuse, there are plenty of restrictions on who can file.

Anyone who files must be able to prove they don’t have sufficient income to pay off debts. They can do so by either comparing their income to the state median for their family size, or by passing the Means Test. Any assets the filer owns must also be protected by exemptions, or limits on equity in various types of property, or they can be seized and sold by the bankruptcy trustee to pay debts. There are waiting periods for both types of bankruptcy, but they are generally longer when either filing is under Chapter 7.

Chapter 13, which is usually available to those who don’t qualify for Chapter 7, reorganizes debts into a payment plan that lasts three or five years. Generally, the automatic stay will last as long as the case. The payment plan pays off debts in order of four categories using the debtor’s disposable monthly income. This type of bankruptcy allows debtors to catch up on payments for secured or nondischargeable debts in a more realistic time period.

Automatic Stay Protections

While your bankruptcy is in good standing, you will be protected from your creditors by the automatic stay. Your creditors must stop calling you and direct all calls to your Arizona bankruptcy attorney once you inform them of your retainer. However, other bankruptcy protections are only triggered when the automatic stay is in place.

When the automatic stay is active, your creditors must immediately stop all collection actions, including:

  • Wage Garnishments

  • Bank Levies

  • Vehicle Repossessions

  • Home Foreclosures

  • Utility Shutoffs

  • Collection Calls

  • Evictions (Only At Certain Points In The Process)

  • Public Benefit Overpayment Collections

Domestic Obligations & The Automatic Stay In Bankruptcy

The automatic stay is powerful, but can’t stop collections on all debts without exception. Some debts won’t be discharged in bankruptcy, but an accompanying garnishment will pause while the case is active. An exception applies for domestic obligations. If your wages are being garnished for child support or spousal maintenance, filing Chapter 7 bankruptcy will do nothing to stop this. It’s vital that your court-ordered dependents continue to receive financial support, regardless of your bankruptcy filing.

However, a Chapter 13 bankruptcy may help. If your Chapter 13 bankruptcy arranges for full repayment of your back child or spousal support, the automatic stay will stop your wage garnishment. If you are filing Chapter 13 bankruptcy to stop a domestic obligation wage garnishment, it’s vital that you do so with careful planning and the assistance of an experienced Arizona bankruptcy attorney.

Creditor Relief From The Automatic Stay

Even when the automatic stay is in good standing, your creditors can ask for the court’s individual permission to proceed with collection. This is known as a Motion for Relief from the Automatic Stay. If the court grants this motion, that creditor will be allowed to proceed with their desired collection method, but the rest of your creditors will still be barred from collection. These are most likely to be granted in eviction and landlord/tenant matters that are delayed by the bankruptcy. The court is also more likely to grant these motions when the debtor has little to no equity in the asset in question. The same can be said when it appears infeasible for the debtor to catch up on payments during the bankruptcy.

A bankruptcy attorney in Nevada should be able to let you know if any of your creditors are likely to be granted a motion for relief from the automatic stay.

Exploding Automatic Stay

When your bankruptcy is dismissed, you can usually simply refile the case and carry on. However, this doesn’t come without its costs. First, you will need to pay additional filing fees, as well as other potential fees, to refile your case. Second, you will be at risk of your creditors proceeding with collection during the pause in the automatic stay. Third, your case could potentially be subject to an exploding stay. If you file bankruptcy more than once in a one-year period, your automatic stay will only last 30 days. If you file more than twice in a one-year period, you will receive no automatic stay protections during your bankruptcy.

Emergency Situations Call For Fast Bankruptcy Filings

In some circumstances, someone with debt may find themselves on the brink of a repossession or garnishment, with only a few days to prepare. A bankruptcy petition is a long, detailed document that is usually more than 50 pages long. Consequently, it can take a significant amount of time to prepare. If the repo man is knocking on your door, you may need to utilize a skeleton bankruptcy petition.

A skeleton petition allows you to quickly take advantage of the automatic stay. When preparing your standard bankruptcy petition, you will need several types of documents- bank statements, vehicle registrations, court orders, tax returns, and more.

To file a skeleton petition, you will only need your basic identification and contact information, as well as your income information from the last 6 months. You will also need to complete an online credit counseling course before a skeleton filing, just as you would before a standard filing. You will have two weeks from the date of the skeleton filing to complete and file the rest of your petition. Your bankruptcy will proceed as usual for the remainder of the case.

Contact Our Experienced Debt Relief Team Today For Assistance In Las Vegas Or Phoenix

The Automatic Stay is a strong protection offered by bankruptcy, but is subject to limitations and exceptions. To prepare yourself for these situations, as well as other bankruptcy obstacles, you need an experienced attorney on your side. Therefore, for skilled representation with competitive rates and zero down payment plan options, call or use our online form to schedule your free consultation with our Affordable Bankruptcy Law Firm today. We offer $0 Down Bankruptcy Filings, Chapter 7 Bankruptcy and Chapter 13 Bankruptcy filings, Medical Bankruptcy Filings, Bankruptcy and Divorce, and Emergency Bankruptcy Filings.


Related Articles:

Automatic Stay and Bankruptcy Chapters

Preparing for a Bankruptcy Filing

Life After Bankruptcy


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