Are There Exceptions to the Automatic Stay During a Bankruptcy Case?

 Posted on September 09, 2021 in Bankruptcy

One of the benefits of filing for bankruptcy is that doing so places an automatic stay on collection actions by creditors. This means that creditors will be prohibited from making any attempts to collect debts while the bankruptcy case is ongoing, including contacting a debtor through phone calls, letters, garnishing their wages, or foreclosing on a person’s home. The automatic stay gives a person the opportunity to assess their financial situation and determine their options during the bankruptcy process without the requirement to repay certain debts during this time. However, there are certain types of exceptions to the automatic stay, and a person will need to understand how these will apply in their case.

Issues That Are Not Affected by the Automatic Stay

The following types of actions are not covered by the automatic stay in a bankruptcy case:

• Criminal cases - If a person is facing criminal charges, filing for bankruptcy will not affect these proceedings, and it will not stop the collection of fines, fees, or restitution that a person is ordered to pay to a victim.

• Civil cases involving family or domestic issues - Most family court proceedings cannot be halted by the automatic stay, including child custody and paternity cases, as well as divorce cases addressing issues other than the division of marital property. A person will also be required to continue paying domestic support, including child support and spousal support. If a person has failed to meet their domestic support obligations, the automatic stay will not stop proceedings to suspend their driver’s license or occupational license, intercept tax refunds, or use other methods to collect support payments.

• Tax cases - While the automatic stay will prevent the IRS or a state or local government from collecting taxes through liens or levies, other types of actions can be taken. The IRS may conduct a tax audit, ask a person to submit tax returns, perform a tax assessment, or send notices to a person regarding taxes that are owed.

• Evictions - If a lease expires before or during a bankruptcy case, the automatic stay will not prevent the landlord from taking action to evict the tenant or take possession of the property. Landlords are also allowed to continue eviction proceedings that began before a tenant filed for bankruptcy, as long as the landlord had obtained a judgment of possession or is evicting a tenant based on the illegal use of controlled substances or endangerment to the property.

It is also important to note that if a bankruptcy case is dismissed, and a person files for bankruptcy a second time within one year, the automatic stay in the second case will expire after 30 days. If bankruptcy is filed for a third time within one year, there will be no automatic stay, although the debtor may petition the court and ask for a stay to be put into effect. 

Contact Our Boerne Bankruptcy Automatic Stay Attorney

If you have questions about the protections that you can receive by filing for bankruptcy, the Law Offices of Chance M. McGhee is here to help. We will advise you of your rights and options and work with you to complete the bankruptcy process successfully. Contact our New Braunfels bankruptcy and debt relief lawyer at 210-342-3400 to set up your complimentary consultation.

Sources:

https://www.law.cornell.edu/uscode/text/11/362

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics