The Automatic Stay
Across New York State, businesses and individuals may find themselves struggling financially and be unsure of how to stop debt collectors from contacting them while they try and figure out how to move forward. When the decision is made to file for bankruptcy in New York, filers are able to reap certain benefits under the automatic stay. If you are feeling overwhelmed by the prospect of foreclosure or regular contact from debt collectors, the Law Offices of Michael D. Pinsky, P.C. is here to help. An Orange County bankruptcy attorney at our law firm can walk you through every step of the process and understand your rights under the automatic stay. Contact our office today to discuss your situation and learn how we can help.
What are the benefits of the automatic stay?
The automatic stay can provide a number of benefits to both consumers and businesses who file for bankruptcy. The automatic stay prohibits the following actions from happening:
- Repossessions
- Wage garnishments
- Lawsuits
- Bank restraints
- Debt collection
- Phone calls from debt collectors or lenders
- Foreclosure Actions
How does the automatic stay work?
Common to bankruptcy cases under all chapters, the automatic stay of Bankruptcy Code section 362(a) is a statute that functions as a court order. The automatic stay arises without the need for any action by the Bankruptcy Judge as soon as a voluntary bankruptcy case is filed. It is in the nature of an automatic prohibitory injunction against collection activity, and it applies to nearly all kinds of collection actions, whether they be demands for payment, harassment, repossession, foreclosure, the commencement or continuation of litigation, judgment enforcement, the perfection or enforcement of a non-judicial lien, etc. Certain exceptions to the stay exist, such as:
- The exercise of the police power of the state
- Domestic relation actions to establish child support, alimony (separate maintenance), and paternity
The automatic stay is of central importance to the proper functioning of the bankruptcy process, proving as it does a much-needed breathing spell to the debtor, free from the pressures of debt collection and litigation.
How long is the stay effective?
The automatic stay remains in effect until it is lifted by Bankruptcy Court order, or by the closure of the case. The stay applies to property of the bankruptcy estate, and under certain circumstances to the property of the debtor even if that property is no longer considered the property of the bankruptcy estate.
Who is eligible for the protection of the automatic stay?
The automatic stay can provide some breathing room for the filer to get his or her affairs in order and move forward with the bankruptcy process. It is important to note that the automatic stay applies to both federal and state laws. Anyone who files for bankruptcy is granted the protections of the automatic stay, whether it is an individual, a small business, or even a large corporation.
What happens after the automatic stay goes into effect?
Once the automatic stay goes into effect, the filer continues with the bankruptcy process.
For Chapter 7 bankruptcy, liquidation will occur. All non-exempt assets will be liquidated to pay back creditors as much money as possible. This can help to cover the debt although it may not be able to meet up to the amount you owe. It can still erase debt.
Chapter 13 bankruptcy functions differently than Chapter 7 bankruptcy because it involves making a repayment plan. Individuals can work with a professional attorney to come up with a repayment plan. This repayment plan can help to fix their financial situation and prepare for a better future. Through this process, individuals are allowed to keep their possessions while still paying back their creditors. They must attend the bankruptcy court to get the repayment plan approved. Then it will be set in motion and depending on the plan, it will take a designated amount of time to pay off, whether it is three or five years.
What happens if the automatic stay is violated?
Knowing and willful violation of the stay exposes creditors to sanctions by the Bankruptcy Court, If a debtor suffers actual damages as the result of the knowing and willful violation of the stay, the creditor is required to pay the debtor’s reasonable attorneys fees incurred in responding to the stay violation. Intentional violations of the stay expose the offending creditor to possible punitive damages. If a creditor does not follow the orders of the Automatic Stay and harasses a debtor, they can be held in violation. These actions may lead the Bankruptcy Court to enforce certain consequences. Violations may require a creditor to compensate a debtor for their actions. For example, if a creditor repossesses a debtor’s property while the Automatic Stay is in effect, they may have to return the property. If a creditor is still taking part in collection activities, it is important to contact an attorney or the Bankruptcy Court for protection.
Contact an Orange County Bankruptcy Attorney
If you believe that you may benefit from filing for bankruptcy and seeking the protections of the automatic stay, it is important that you speak with an experienced New York bankruptcy lawyer. The Law Offices of Michael D. Pinsky, P.C. has represented clients throughout the Hudson Valley when they are in need of a bankruptcy attorney they can trust. Our firm will represent your interests and help you start fresh. Contact the Law Offices of Michael D. Pinsky, P.C. today to discuss your situation with an experienced Orange County bankruptcy attorney.
