What is the Automatic Stay in Bankruptcy Proceedings?

The goal of the bankruptcy process is to help Americans cope with large amounts of debt, whether it be credit card debt, medical expenses, business losses, or a combination of these obligations.  The bankruptcy process offers many advantages and benefits that make it an attractive option for Georgians faced with ever-growing bills and aggressive collection agencies or creditors.

One of the bankruptcy process’s major benefits is called the “automatic stay.”  The automatic stay kicks in when the individual (called the debtor) files the bankruptcy petition with the court.  The automatic stay basically stops any lawsuit filed against the debtor by a collection agency or other creditor.  Because of the power of the automatic stay, many Georgians choose to file bankruptcy in order to prevent their creditors from taking adverse actions against them.  For example, the automatic stay may prohibit utility companies from turning off gas, electric, water, or telephone services.  Additionally, the automatic stay can completely stop wage garnishment proceedings, even if there are multiple proceedings against a single debtor.  Importantly, sometimes the automatic stay can even temporarily delay a foreclose proceeding (though typically the foreclosure proceeding might be ultimately resumed, the temporary delay can still be very helpful in giving the family time to evaluate their options).

While the automatic stay does offer many benefits to debtors, it is also important to bear in mind that the stay cannot be used to prevent all types of actions.  For instance, the automatic stay will not halt any lawsuits against the debtor that seek to collect alimony or child support.  Moreover, the automatic stay does not prevent the IRS from auditing the debtor or proceeding with some other tax-related claims.

Additionally, it should also be remembered that creditors – many of whom employ their own attorneys to help them collect debts during a bankruptcy proceeding – can get around the automatic stay in certain situations.  This is called “lifting” the stay and a motion to lift a stay can be approved by the bankruptcy court if the creditor (or the creditor’s attorney) can persuade the judge that the property in question should be exempt from the automatic stay provisions.

As you can see, the bankruptcy process can be complicated or confusing to an individual debtor, which is why working with a skilled Georgian bankruptcy attorney is highly recommended.  Contact our office today to speak to one of our lawyers about your case and learn how the automatic stay can help you navigate the bankruptcy proceedings and emerge debt-free!