When you file for bankruptcy, an important protection called the “automatic stay” kicks in. This is a crucial tool that protects you from legal action from creditors and debt collectors but can sometimes be lifted by the court. Understanding the circumstances of why a court would lift the automatic stay can help you prepare for all possible outcomes. To learn more about automatic stays and the steps you should take after filing, set up your free consultation with a skilled Bergen County bankruptcy lawyer today.
What is an Automatic Stay?
Immediately following the filing of your bankruptcy case, an injunction called the automatic stay will generally be imposed against creditors. This injunction stops creditors and debt collectors from continuing to pursue existing lawsuits or legal actions against you designed to collect the debt that you owe. It also prevents these entities from initiating new legal proceedings in an attempt to collect debt.
Some actions that creditors must stop after an automatic stay is imposed include the following.
- Phone calls
- Letter
- Emails
- Filing a lawsuit
- Wage garnishment
- Foreclosures or repossessions
The purpose of the automatic stay is to give you a fair chance to gather yourself and address your financial problems without outside pressure from creditors and debt collectors. It gives you time to reorganize or discharge your debts through the bankruptcy process.
While the automatic stay provides significant protection, it is important to understand that it is not permanent and could be removed.
Why Would a Court Lift the Automatic Stay?
Although the automatic stay has the potential to last until the end of your bankruptcy case, it is not a permanent protection. Depending on the details of your circumstances, a court may decide to lift the stay and permit creditors to resume legal action and other tactics to recover the money owed.
The most common way the automatic stay is lifted by courts is through a creditor’s
Motion for Relief from the automatic stay. If the creditor can prove that they will suffer undue and substantial financial harm because of the stay, they may be able to convince a court to lift the protection. The creditor has the burden of proof and you will be permitted to challenge the motion, but it is a viable way to lift the stay.
The automatic stay could also be lifted if the court finds that you are acting in bad faith. If you filed for bankruptcy solely to elude or delay creditors without the legitimate intention of reorganizing your finances or repaying debts, a court could determine that you filed in bad faith and lift the automatic stay. Evidence of bad faith filing can be found if you have filed several bankruptcies in a short period, especially when they were later withdrawn or dismissed.
As an individual filing for bankruptcy, it is important to understand your rights and legal protections. Reach out to a skilled attorney at the Law Office of Boyd & Squitieri today to set up your consultation.
