Relief from a Chapter 7 Automatic Stay
When you file for bankruptcy, an automatic stay puts creditors on notice to cease and desist in taking any action against you or your belongings. Relief from a Chapter 7 automatic stay can be gained by the consumer almost immediately. Once you file the necessary paperwork, the clerk of the United States Bankruptcy Court sends out notification to the creditors listed in the documents you filed with the court. It explains that the debtor is under the protection of the courts and places in effect an automatic stay. There should be further attempts on their part to continue with any collection activities.
Other People Are Reading
-
Significance
-
In a United States Senate report, it was stated that the "automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws." (Senate Report No. 95-989). The relief from a Chapter 7 automatic stay goes into effect with the filing of the petition, without the need for a meeting or an order from the bankruptcy court. Technically, creditors are legally bound by the stay before they may even have knowledge of the proceedings.
Prohibited Acts
-
Creditors with claims that are in place before the beginning of the Chapter 7 case are not allowed to contact the debtor to ask for or demand payments for any outstanding obligations. They are prohibited from asking the debtor to provide collateral for unsecured debts. Creditors cannot commence a lawsuit or continue any pending lawsuits against the debtor. They are not allowed to enforce a judgment and must notify anyone acting on their behalf to cease all enforcement activities that may have been started, such as a foreclosure sale, wage garnishment or utility shutoff.
-
Violations
-
Federal bankruptcy laws allow individuals to recover actual damages, attorney fees and other costs from a creditor found in willful violation of the automatic stay. In addition, if other creditors are harmed in some way by breach of the automatic stay, such as the seizing of assets in which they have a security interest, those creditors may also have a right to seek relief. In some cases, punitive damages may also be awarded. Generally, damages are only awarded in cases where it can be clearly shown that injury or loss were sustained as a result of the stay violation.
Exceptions
-
There are some actions that cannot gain the debtor relief from a Chapter 7 automatic stay. For example, child support and alimony payments are not subjected to this provision. You must continue to pay, and any legal proceedings regarding these items can not be stopped. If you are in the midst of criminal prosecution or about to be indicted, the process will continue as though you never filed for bankruptcy protection. Any legal administrative or legal proceeding by the government that doesn't involve collecting on a debt may also continue.
Discharge
-
The automatic stay remains in place until one of three events occurs: 1) the judge rescinds the stay at the request of one of the creditors; 2) the particular property is no longer in the possession of the estate; 3) the case is discharged.
When the case is discharged, the relief from a Chapter 7 automatic stay is actually exchanged with a permanent injunction or order issued by the bankruptcy court. The order wipes out the obligations of the debtor and obstructs any efforts on the part of creditors to collect on the debts at any point in the future.
-
