Repeated Bankruptcy Filings Can Limit Automatic Stay Protections

The automatic stay is one of the most powerful protections in bankruptcy. It typically takes effect immediately upon filing and stops most collection activity, including lawsuits, foreclosure actions and repossessions. For many filers, it provides immediate relief from creditor pressure. That protection is not unlimited, however. 

When someone files multiple bankruptcy cases within a short period of time, the law may restrict how long the automatic stay will last, or if it will apply at all. This is designed to prevent misuse of the bankruptcy system.

The stay prevents creditors from engaging in collection activities, including sending collection letters, calling the debtor at home, initiating foreclosure proceedings, filing a debt-related lawsuit and repossessing vehicles or other collateral property. Even if creditors have already filed a lawsuit or initiated the legal procedures necessary to foreclose on a home or repossess a vehicle, the process usually halts while there is an active bankruptcy filing underway.

It is important to understand that even when the automatic stay is in place, creditors can ask the court for relief by initiating adversarial proceedings. These actions can be brought when a debt is not eligible for discharge or there is a belief that the bankruptcy process is being manipulated and misused.

Specifically, the courts may limit the duration of the automatic stay if the filer has a prior, dismissed bankruptcy case from within the last year. In such cases, the automatic stay may only remain in effect for the first 30 days of the bankruptcy case. If a filer had two or more incomplete bankruptcy filings dismissed within the last 12 months, then the courts may not grant an automatic stay for any subsequent filing. 

The elimination of the automatic stay prevents the abuse of this critical legal protection by individuals who do not initiate bankruptcy proceedings in good faith. Courts can subsequently extend automatic stay protections to those who demonstrate good faith and seek to halt collection actions.

Repeat bankruptcy filings often reflect an unfortunate series of circumstances rather than any attempt to game the system. The guidance of an experienced bankruptcy attorney can be critical for those pursuing a repeat filing after a prior failed bankruptcy case.

Jeff Field & Associates advocates for individuals, married couples and business owners in Georgia seeking debt relief, including those who have previously filed for bankruptcy. Please call  404-381-1278 or contact us online to discuss your legal needs. Our offices are in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur.