Automatic Bankruptcy Stay – Bankruptcy Attorneys in Arizona

The Automatic Stay – Bankruptcy Attorneys in Arizona
The main reason anyone files for bankruptcy is because of a large amount of creditor claims and an unmanageable amount of debt. The automatic stay is one of the main benefits of filing for bankruptcy.

The automatic stay is a form of injunction that applies automatically to stop any foreclosure, garnishment, collection activity, or lawsuits the moment your petition is filed.¹ Under the Bankruptcy Code,  the automatic stay also stops any property liens or proceedings in U.S. tax court concerning your tax liability. 11 U.S.C. § 362(a). Once the automatic stay is in place, creditors should stop all collection efforts or else they are in violation of the automatic stay. If a creditor does not stop collection efforts or does not affirmatively withdraw actions or collection efforts, they may be subject to sanction and you should contact an Arizona bankruptcy attorney about your next steps.

Are there times when the automatic stay does not apply?

A creditor may request that the automatic stay be lifted so he or she can take action against you or your property.² Usually the creditor must file a motion with notice and a hearing to object to the automatic stay and must show cause, including your lack of adequate interest in the property. 11 U.S.C. § 362(d)(1).

In certain other situations, the automatic stay may not apply at all. These exceptions typically include family law, criminal law, and issues with the regulatory powers of the government.³ More specifically, a sampling of these situations include:

1.      If there is a criminal action or proceeding against you⁴

2.      If there is a civil action against you to establish paternity, child custody, divorce, anything regarding domestic violence, or a modification for domestic support obligations⁵

3.      If, under the Social Security Act, there is an enforcement of a medical obligation⁶

4.      If your driver’s license, professional license, or recreational license is withheld or suspended under the Social Security Act⁷

5.      Whether there is a domestic support obligation from property that does not belong to the estate⁸

6.      Whether there is an audit by a governmental unit to determine tax liability⁹

7.      If there is an action by a State licensing body regarding your licensing as an educational institution¹⁰

8.      If there is any act to enforce a lien against a security interest in real property for two years after the date of entry of a claim that the bankruptcy petition was part of a scheme to delay, hinder, or defraud your creditors because of either a transfer of most or all of your interest in the real property or multiple bankruptcies affecting the real property.¹¹

There are many other specific scenarios in the bankruptcy code that lay out when an automatic stay does not apply.

How long does the automatic stay last?

The automatic stay usually continues until (1) the case is closed; (2) the case is discharged if this is a chapter 7, 9, 11, or 13; or lastly (3) the case is dismissed, whichever is earlier. 11 U.S.C. § 362(c)(2).

[1] Glossary, uscourts.gov, http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Glossary.aspx (last visited Mar. 6, 2014).

2 Id.

3 James Portman Webster, What is the Chapter 7 Automatic Stay and How Does it Work in Arizona?,

4 11 U.S.C. § 362(b)(1).

5 11 U.S.C. § 362(b)(2)(A).

6 11 U.S.C § 362(b)(2)(G).

7 11 U.S.C. § 362(b)(2)(D).

8 11 U.S.C. § 362(b)(2)(B).

9 11 U.S.C. § 362(b)(9)(A).

10 11 U.S.C. § 362(b)(15).

11 11 U.S.C. § 362(b)(20), (d)(4).