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Bankruptcy Code’s Automatic Stay

  • October 1, 2020
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What is the Bankruptcy Code’s automatic stay?

It’s a law that prohibits creditors from debt collection activities. The Bankruptcy code’s automatic stay takes effect as soon as a bankruptcy case is filed; however, there are exceptions to its applicability. For example, suppose you have had two bankruptcy cases pending within a year. In that case, the automatic stay does not go into effect with the filing of the third case filed in that same year. The court can impose the stay for the third time, but it’s not automatic. The debtor must ask for the imposition of the stay, and the Bankruptcy Court does so upon finding of proper grounds.

Here are some examples of collection actions subject to the automatic stay:

Civil lawsuits
Disconnection of utility services
Foreclosures
Evictions
Wage garnishments
Bank garnishments and levies
Vehicle repossessions

The automatic stay does not stop:

Child Support and paternity actions
Criminal proceedings

 

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