When you file for Chapter 7 or Chapter 13 bankruptcy, it activates an automatic stay. This is an injunction that immediately stops most creditors from taking action to collect debts. This protection is a huge help for debtors, and it can be reason enough to file for bankruptcy.
The Utah bankruptcy automatic stay does not apply to all types of debt, however. What follows is a basic outline of what collection actions the stay does and does not protect, and information about how long the injunction remains in effect.
What Actions Can the Automatic Stay Prevent?
The bankruptcy stay is a lifesaver for many debtors. Some of the ways this injunction can help include:
- Stopping utility disconnection – When you file for bankruptcy, the utility company cannot turn off service for at least 20 days.
- Stopping foreclosure – Both Chapter 7 and Chapter 13 bankruptcy put a temporary halt to foreclosure proceedings, and Chapter 13 can allow you to keep your home.
- Stopping eviction – If your landlord doesn’t already have a judgment of possession against you, the bankruptcy stay can stall the eviction proceedings.
- Stopping wage garnishment – Filing for Chapter 7 or Chapter 13 allows you to take home your full salary, as the stay prevents your wages from being garnished.
- Stopping public benefits collections – If you received an overpayment of benefits, the agency cannot take the money out of your future checks or send you a bill.
Which Actions Are Not Subject to the Automatic Stay?
The bankruptcy stay is a powerful tool, but it isn’t helpful in every financial situation. The injunction will not stop:
- IRS audits, tax assessments and demands for payment
- Actions to collect child support or alimony
- Fines resulting from criminal proceedings
- Payments to repay loans from a pension
How Long Does the Bankruptcy Automatic Stay Last?
The bankruptcy stay generally lasts until the day you receive a discharge. At that point, you can expect to see collection action on any debt that remains. However, any creditor who doesn’t want to wait until then can file a motion to lift the stay. If the court grants the motion, the creditor can resume collection.
Multiple filings are an exception to this rule. If you filed two bankruptcy cases in the last year, the automatic stay will only last for 30 days unless you can prove that your current claim was filed in good faith.
If you have questions about Chapter 7 or Chapter 13 bankruptcy, the Law Office of Davis & Jones, P.C., can provide expert answers.
Our legal team, led by attorneys Lee J. Davis and Tony G. Jones, has a combined 40 years of experience helping people in the greater Salt Lake City area obtain relief from their debts. The Law Office of Davis & Jones, P.C., can guide you through the bankruptcy process and help you gain control over your financial future.
For more information on the bankruptcy automatic stay or expert advice on how you can become debt-free, contact us today.