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The Automatic Stay
Just filing bankruptcy invokes the jurisdiction of your federal bankruptcy court and prohibits creditors from actions to collect a debt from you or seize your assets. The automatic stay may be found in Section 362(a) of the United States Bankruptcy Code and is indeed a powerful protection from creditors, lawsuits and harassment. The Stay has exceptions discussed below, but in general it prohibits the following actions from being initiated or continued without leave of Court:
- Lawsuits – from landlords, banks, and other creditors
- Debt Collection- even by the SBA
- Foreclosures – Residential and Business Foreclosures
- Evictions
- Utility Disconnections (temporarily)
- Repossessions
- Wage Garnishment
- Overpayment of public benefits
The Automatic Stay has Exceptions
As noted above, the Automatic Stay has limits and those limitations can be found in Section 363(b) of the United States Bankruptcy Code, but many of the more common exceptions that affect our clients are listed below.
Your creditor can also file a Motion for Relief from the Automatic Stay or a Motion to Modify the Stay; ask your Bankruptcy attorney for more information.
Child Support & Paternity Actions
Child support can still be collected from property that is not “property of the estate” and licenses issued by the State of Texas can still be suspended for failure to pay support obligations. Furthermore, actions to establish support or modify support obligations are not stayed nor are actions to establish paternity.
Tax Debt
The IRS and State tax authorities can still require that you file a return or audit returns you have filed and even assess taxes that you owe. However, their ability to collect the tax debt may be constrained by the Bankruptcy Code.
Criminal Proceedings
Criminal proceedings will not be stopped by Bankruptcy. If you have committed a crime; you can still be prosecuted and sent to prison if found guilty. For example, if you wrote a bad check and were convicted, sentenced and fined, you would still have to serve out your service and pay any fine that was assessed as part of your punishment.
Regulatory Actions
if the government is taking enforcement action against you or your business that is grounded in public health and safety – an environmental spill or other hazard, for example, then you can expect that action to continue unaffected by the automatic stay.
Have a Question?
The Perliski Law Group is dedicated to helping small business owners survive the closure of their business and the resulting financial damage caused the collapse of their business. During your free initial consultation, we will explain how the Bankruptcy process works and outline the debt relief options that may be available to you under Chapters 7, 11 & 13.
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