An automatic stay immediately stops some things
An automatic stay protects the debtor (you) from creditors’ collection activities and halts all judicial and administrative collection proceedings (including proceedings pending before the U.S. Tax Court).
The stay is effective immediately after the petition is filed. The clerk will send an Order for Relief to all creditors, which activates the automatic stay, stopping most collection activities and judicial proceedings. If a creditor continues its collection activities after being notified of the bankruptcy filing, the debtor (you) may be entitled to monetary damages, including costs and attorneys fees. The automatic stay remains in effect until (1) the case is closed, (2) the case is dismissed, or (3) a discharge is granted or denied.
Some things are not stopped by the automatic stay
However, not all activities can be stayed. Proceedings and obligations that are not stayed by filing the petition are:
- Criminal actions.
- Domestic actions, including domestic violence, dissolution of marriage, paternity actions and actions for domestic support or child custody or visitation actions.
- Withholding, suspension or restriction of a driver’s license or recreational or occupational license.
- Reporting of overdue child support to any consumer reporting agency.
- Interception of a tax refund.
- Enforcement of a medical obligation as specified under title IV of the Social Security Act.
- Action to ascertain interest in property to the extent that the trustee’s rights and powers are subject to such determination.
- Commencement or continuation of a governmental unit’s case (or any organization exercising authority under the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Distribution) to enforce the government’s police or regulatory power and judgments, other than money judgments.
- Setoff of a claim regarding commodity futures contracts.
- A setoff of a claim in connection with a repurchase agreement or a claim against debtor for a margin payment.
- Action by the Secretary of Housing and Urban Development to foreclose on a mortgage or deed of trust when insured by the National Housing Act regarding property consisting of five or more living units.
- Tax obligations, including audits, demand for tax returns and tax assessment.
- Action by landlord on a nonresidential lease that expired before the petition was filed.
- Notice and protest of dishonor of a negotiable instrument.
- Action brought by the Secretary of Transportation under the Ship Mortgage Act against a Chapter 11 debtor.
- Action brought by the Secretary of Commerce under the Ship Mortgage Act against a Chapter 11 debtor.
- Action by an accrediting agency regarding the accreditation status of the debtor as an educational institution.
- Action by a state licensing body regarding the licensure of the debtor as an educational institution.
- Action by a guaranty agency regarding the eligibility of a debtor to participate in programs authorized by the Higher Education Act of 1965.
- A financial participant’s exercise of a contractual right under a security agreement.
- Action on a lien for property tax or a special assessment on real property imposed by a governmental unit if tax comes due after filing the petition.
- Withholding of income from a debtor’s wages for a loan, pension, profit sharing, stock bonus, or other plan.
- Enforcement of a lien or security interest in real property if the property was subject to an order dismissing a bankruptcy case within the past two years. The debtor may request to be relieved from this provision after notice and hearing finds that the debtor acted in good faith.
- Enforcement of a lien or security interest in real property if the debtor was ineligible because a case was dismissed for failure to abide by the court’s order or filed the case in violation of an order prohibiting the debtor from being a debtor in another bankruptcy case.
- Continuation of an eviction action if the landlord obtained a judgment of possession prior to the filing of bankruptcy. A debtor may contest this exception by filing a certificate under penalty of perjury that applicable non-bankruptcy law allowed the lease to remain in effect upon the debtor’s cure of the default that was the subject of the eviction. The certificate must be filed within 30 days of filing the petition.
- Continuation of an eviction action if the rented property was endangered because of illegal use of controlled substances on the property (if the proceeding was commenced before filing bankruptcy or the endangerment occurred within 30 days of filing bankruptcy). The landlord is required to file a certificate detailing the facts that support this exception. A debtor may file a certificate denying the charges contained in the landlord’s certificate. The debtor’s certificate must be filed within 15 days of the landlord’s filing.
- Any transfer that is not avoidable under statutory provisions relating to certain creditors (e.g., creditors with judicial liens, executions, or bona fide purchaser status regarding real property) and postpetition transactions.
- Investigation or enforcement action by a securities organization to enforce the organization’s regulatory power.
- Set off of a tax refund for the taxable period that ended before the date of the order for relief against an income tax liability. Under certain circumstances, the government may hold the refund pending the resolution of an action.
- Set off by a master netting agreement participant of a mutual debt and claim.
- The Secretary of Health and Human Services’ exclusion of the debtor from participation in the Medicare program or other Federal health care program.
- Certain aircraft and other equipment are not covered by the automatic stay.
- A utility company may not discontinue service upon receipt of an Order of Relief. However, the debtor or trustee has 20 days after an order for relief to provide the utility company with a deposit or other security to assure payment for future service. The court may, after notice and hearing, modify the amount of deposit required to continue service.
- When a creditor is notified of a bankruptcy, it may not contact the debtor (unless the debtor has filed in pro per). However, a debtor who is injured by the willful violation of a stay may recover actual damages, including costs and attorneys’ fees, and may be entitled to punitive damages in some circumstances.
Previous bankruptcy filings
If an individual debtor in a Chapter 7, 11, or 13 case had a bankruptcy case dismissed within one year of filing a new petition, the automatic stay will terminate 30 days after filing unless the court finds after hearing upon motion of a party in interest that the refiling was in good faith. The case is presumed not to be in good faith as to any creditor if:
- More than one case under Chapters 7, 11, or 13 was pending in the previous year, and
The previous case was dismissed because:
- The debtor failed to amend the petition or schedules when ordered by the court without substantial excuse; or
- The debtor failed to provide adequate protection ordered by the court.
- There has not been a substantial change in the debtor’s financial or personal affairs or any other reason to conclude that the later case will not be concluded, if the case is a Chapter 7, with discharge, or if it is a Chapter 11 or 13, with a confirmed plan that will be fully performed.
If two or more bankruptcy cases pending in the year preceding the current filing were dismissed (other than a dismissal for an abuse of the bankruptcy code), no stay goes into effect and the court is required to enter an order confirming that the stay is not effective on request of a party in interest. However, the court may impose a stay upon request of a party in interest upon motion to establish the good faith of the current filing. The new stay is subject to all of the following requirements:
- It must be filed within 30 days of the petition date;
- It is not effective until the date the order is entered; and
- The motion must satisfy the good faith requirements of the bankruptcy code.
If a small business debtor (as defined by the code) had a small business case pending within the preceding two years, the stay does not apply unless the court imposes the stay. Certain exceptions apply.