One of the most important features of federal bankruptcy law is the automatic stay. When a consumer or business files a petition for bankruptcy relief in U.S. Bankruptcy Court, the petition effectively freezes most collection efforts against the debtor who filed the bankruptcy petition.
In other words, creditors and collection agencies must stop trying to collect debts from the debtor.
Breadth of automatic stay
For example, a stay means that these actions in the context of debt collection, in most circumstances, must stop immediately:
•· New or pending lawsuits
•· Enforcement of prior judgments
•· Lien enforcement
•· Setoffs of debts owed to debtors against debts owed to creditors
•· Phone calls
•· In-person visits or meetings
•· Wage garnishments
•· And others
Limitations on automatic stay
Some provisions in the bankruptcy law provide for relief from the stay, meaning that in certain circumstances, a creditor may continue to collect against a debt or ask the bankruptcy court for permission to do so. For example:
•· The U.S. Bankruptcy Court may give permission to continue a pending lawsuit.
•· In certain situations, the court may allow a creditor to seize pledged collateral (such as a vehicle securing a delinquent car loan).
•· Criminal cases do not stop.
•· Civil suits regarding these topics continue: paternity, child support, child custody, alimony, divorce (except certain property division issues), domestic violence.
•· Wage withholding for alimony or child support usually continues.
•· Negative government actions regarding certain licenses may continue.
•· A government audit regarding taxes may continue.
•· An action by a commercial landlord to repossess commercial property under an expired lease can continue.
•· An act by a government agency to accredit or license an educational institution may proceed.
•· Certain loan payments from some kinds of retirement accounts that are repaid from wage deductions may continue to be withheld and paid.
•· In certain situations, a residential landlord may continue an eviction from rented premises when a judgment to repossess was granted before the bankruptcy petition was filed.
•· And others
Questions about the automatic stay should be directed to a bankruptcy lawyer.
The attorneys of Giddens & Gatton and P.C., in Albuquerque represent personal and business debtors and creditors throughout New Mexico in bankruptcy matters, including those concerning the automatic stay.