West Palm Beach Bankruptcy Blog

The Automatic Stay

People filing for bankruptcy have often been harassed by creditors demanding payment and  threatening lawsuits.  But when you file for bankruptcy, the bankruptcy court immediately and automatically enters an Order for Relief (also known as an Automatic Stay) that requires your creditors to immediately stop their collection efforts.  That means that they cannot:

• Call you.
• Write you letters.
• Garnish your wages.
• Empty your bank account.
• Take your car.
• Take your house.
• Cut off your utility service.
• Cut off your welfare benefits.

While not all collection actions are stopped by the automatic stay, the following are:

• Anyone trying to collect credit card debts.
• Anyone trying to collect medical debts.
• Anyone trying to collect attorney’s fees.
• Anyone trying to collect debts arising from a breach of contract.
• Anyone trying to collect legal judgments against you (other than for child support or alimony).
• Government entities trying to collect overpayments of public benefits such as Medicaid, SSI, or Temporary Assistance to Needy Families cannot reduce or stop your benefits.
• If you were convicted of a crime such as writing a bad check and were sentenced to do community service and pay a fine, you will still have to do the community service, but you will not have to pay the fine.
• The automatic stay stops the Internal Revenue Service from issuing a lien against you or trying to take your property or income.
• Foreclosures are automatically stayed unless you filed for bankruptcy within the previous two years and the bankruptcy court lifted the automatic stay  in the earlier case, thereby allowing the lender to proceed with the foreclosure.
• Utility companies (such as gas, heating oil, telephone, water, electricity) cannot cut off your utilities once the automatic stay is in effect.  However, they can stop your service twenty days after you file for bankruptcy if you do not provide them with a deposit to assure future payment.