When you file for Chapter 7 bankruptcy, an “automatic stay” goes into effect. This means that creditors, collection agencies, and government entities are stopped from trying to collect debts from you. Any harassment by creditors or collection agencies must stop as soon as they are made aware of the bankruptcy. If you are at risk of losing basic resources such as your home or utilities, or are faced with the prospect of multiple wage garnishments, an experienced Los Angeles bankruptcy attorney can help you secure an automatic stay and other aspects of bankruptcy relief.

How Does an Automatic Stay Work?

As noted above, an automatic stay helps stop certain collection activities completely. For example, it stops wage garnishments. Typically no more than 25% of your wages can be taken to satisfy lawsuit judgments, but up to 50% can be garnished for child support and alimony. However, in tough economic times, most people rely on their entire paycheck to get by and getting rid of wage garnishment can make their lives significantly easier.

Some creditor activities are merely delayed rather than halted outright. For example, if you are facing foreclosure, an automatic stay under Chapter 7 will only temporarily stop those proceedings. Chapter 13 may be a better choice. Similarly, if you are behind on utility payments and the company has threatened to cut off your service, the Chapter 7 automatic stay will prevent disconnection for 20 days.

Can a Creditor Get Around an Automatic Stay?

There are certain proceedings that are not stopped by filing for bankruptcy. This includes a lawsuit to establish or collect alimony or child support. It also includes instances where money must be withheld from your income in order to repay a loan from most job-related pensions.

Creditors can ask the court to remove or “lift” the stay depending on the circumstances. For example, if you are facing eviction but the landlord has not already received a judgment of possession against you, the automatic stay may help you, at least for a few weeks. However, if your landlord alleges you’ve been using illegal drugs on the property and asks the court to lift the stay, the court is likely to lift the stay. Similarly, a stay may not be as effective if you file for bankruptcy right before your house is going to be sold at a foreclosure sale. An automatic stay will only halt the proceedings temporarily if you can’t pay the back-payments you owe on your mortgage and have no way of paying the mortgage in the future. The creditor for your mortgage will likely ask to the court to lift the stay with respect to the foreclosure and the court most likely will.

Also, there are some circumstances that an automatic stay simply won’t affect. You can be deeply in debt, but the IRS can choose to audit you or issue a tax assessment. On the other hand, the stay will prevent the IRS from seizing your property or issuing a tax lien.

An Experienced Attorney Can Help You Protect Your Finances

Although there are ways for creditors to get around an automatic stay, for many consumers, the automatic stay will protect most or all of their interests. A trustworthy Los Angeles bankruptcy lawyer can guide you through the bankruptcy process and help you obtain the greatest possible relief from your debts. Contact Devin Sawdayi at 310-475-9399 or via our online form for help.