If you are drowning in debt, creditors will relentlessly pursue you with phone calls, letters, and even lawsuits. Filing for bankruptcy can provide relief through an automatic stay, which puts a stop to most collection activities. However, creditors can petition the court ot lift the stay and continue their pursuit of assets. If you are considering bankruptcy, it’s crucial to understand the circumstances under which the court might lift the automatic stay and the importance of seeking guidance from a qualified New City Bankruptcy Attorney.
What Is the Automatic Stay?
When you file for bankruptcy in New York, the court will issue an order known as the automatic stay. This is a crucial protection for debtors, outlined in Section 362 of the Bankruptcy Code. The automatic stay temporarily halts all creditor actions against the debtor and their property, preventing collection efforts, foreclosures, and other actions until the bankruptcy case is resolved. Once the case is dismissed or when debts are discharged, the automatic stay will terminate.
It’s important to understand that the automatic stay requires the creditor to immediately stop communication, including harassing phone calls at work, foreclosures, and wage garnishments. Generally, these protections will last for the duration of the bankruptcy case. For Chapter 7 filings, this is typically six months, while Chapter 13 filings generally take three to five years.
You should note that there are certain exceptions to this stay. For instance, lawsuits over unrelated affairs like personal injuries, criminal prosecutions, or family law matters, and certain government actions. Nevertheless, the automatic stay is intended to safeguard the debtor’s assets during the bankruptcy process, but it’s not an absolute shield against all legal actions. It’s crucial to understand the specific exceptions to avoid violating the stay.
Does Filing for Bankruptcy Stop the Foreclosure Process?
When you are filing for bankruptcy, the automatic stay will immediately stop all collection actions, including active foreclosures. However, it’s critical to understand that these protections may not be available if you have repeatedly filed and dismissed bankruptcy cases in the past.
Additionally, the type of bankruptcy you choose will impact your home. Chapter 7 will only result in the temporary delay of foreclosure, while Chapter 13 allows you to begin a repayment plan to resolve overdue balances over time.
Can My Utilities Be Turned Off During Bankruptcy?
Utility providers are bound by the automatic stay and cannot unilaterally disconnect your service solely because you filed for bankruptcy. However, they retain the legal right to request “adequate assurance of future payment”—typically a security deposit—which must be provided within 20 days of filing to keep active utility connections. While you remain responsible for any utility charges accumulated after your filing date, your pre-filing delinquent utility debt can be incorporated into the petition and ultimately discharged.
Can the Court Lift an Automatic Stay?
New York courts can lift the automatic stay in a bankruptcy case under specific circumstances. This is generally the case when a creditor demonstrates a legitimate need to proceed with collection efforts or when the debtor’s financial situation prevents a successful reorganization. If a debtor can prove that the automatic stay will cause them significant financial harm, the court may grant relief. In addition, if the debtor is perceived to have filed for bankruptcy to evade creditors, the court can also lift the stay.
If creditors want the automatic stay lifted, they will need to file a motion for relief with the bankruptcy court. The court will then hold a hearing. During this hearing, the creditor must present compelling evidence to support their claim. The court will determine whether the creditor has established sufficient grounds for lifting the stay. Debtors are entitled to respond to the motion within 14 days after being served. If you fail to respond, the court can grant the motion by default.
Contact an Experienced Attorney Today
Filing for bankruptcy can be overwhelming, but having an experienced Rockland County attorney from The Lauterbach Law Firm by your side can make all the difference. Our legal team specializes in bankruptcy law and is dedicated to providing our clients with guidance from beginning to end. If you are considering bankruptcy, contact us today to schedule a consultation.
