Does Every Bankruptcy Filer Receive an Immediate Automatic Stay?

Bankruptcy offers several distinct forms of financial relief and protection for filers. It can be a lifeline for individuals, married couples, self-employed professionals and small business owners who are overwhelmed by financial obligations, often due to factors outside of their control.

Medical debts caused by a sudden health problem, untenable credit card balances following a job loss and other sudden financial obligations can leave people struggling to set budgetary priorities and worrying about their futures. A successful Chapter 7 bankruptcy ends with the discharge of eligible debts while Chapter 13 gives a debtor the chance to create a reasonable repayment plan. 

The automatic stay granted after either type bankruptcy petition is filed provides protection from creditor collection efforts. While the bankruptcy case is still active, the automatic stay prevents creditors from continuing to communicate with debtors. They typically also need to dismiss any pending lawsuits until the court has resolved the bankruptcy case.

Most of the time, the automatic stay granted by the courts takes effect the same day that a person files. The courts report pending bankruptcy cases to the credit bureaus. Most creditors and collection agencies receive daily reports informing them if debtors who owe them money have initiated bankruptcy proceedings. They then must stop their collection efforts immediately. If creditors are unaware of the pending bankruptcy case, filers can provide them with the case number and the date of filing to halt those ongoing collection efforts.

In cases where there are questions about potential bankruptcy abuse, the courts may limit or deny an automatic stay. Generally speaking, anyone who has attempted to file a bankruptcy within the last 12 months has limited protection from collection efforts.

A second bankruptcy filed within 12 months of a prior dismissed case could result in the courts limiting the automatic stay to just 30 days. It still takes effect immediately, but the filer is at risk of creditors resuming collection activity if they do not move forward with your case promptly. Anyone who files for a third bankruptcy within 12 months is unlikely to receive any automatic stay protections.

People concerned about the possibility of continued collection efforts during a bankruptcy case may need to discuss their circumstances with an attorney. Legal representation during a filing decreases the likelihood of the courts dismissing the case and limiting the filer’s future eligibility for automatic stay protections.

Jeff Field & Associates represents Georgians in all types of bankruptcy proceedings so that they can regain financial stability without being bothered by creditors. We have offices in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur. Please call 404-381-1278 or contact us online discuss your debt issue.