Strong Advocacy | Personalized Service | Real Solutions

File bankruptcy, activate an automatic stay

If you feel as though creditors have been following you (figuratively speaking) around Minnesota to try to collect debts, or you are worried about losing your home to foreclosure because you’re behind in mortgage payments, you may want to explore financial options that can help protect your assets. In certain circumstances, it’s possible to obtain an automatic stay against collections or litigation, including creditors’ phone calls, government officials or others who may want to sue you. Under bankruptcy statutes, this “stay” occurs as an injunction (an order or warning) imposed by the court.  

It is important to fully understand what an automatic stay can and cannot do for you during bankruptcy proceedings. For example, as mentioned in the opening section of this post, a stay can prevent creditors from calling you or attempting in any way to collect debt from you until bankruptcy proceedings are complete. However, an automatic stay does not erase a legitimately owed debt, although you can resolve many forms of debt through the bankruptcy process itself.  

Actions in process must come to a halt due to automatic stay in bankruptcy 

If a creditor or individual has already filed a lawsuit against you, proceedings must come to a halt if you file for debt relief under a U.S. bankruptcy program, which activates an automatic stay injunction. This stay includes active litigation regarding personal injury as well, such as if someone has filed a claim against you following a car accident.  

Creditors sometimes ask the court to lift an automatic stay injunction 

In certain circumstances, such as if creditors believe the assets in question will decrease in value during the time it takes to complete the bankruptcy process, they might request that the judge overseeing the case lift the automatic stay. To make such a request, the creditor must file a Motion for Relief. If the court grants the motion, it will either remove or modify that automatic stay injunction so that the creditor in question can continue to pursue collection of the debt.  

If the court does not grant the motion, and the creditor continues to attempt to collect the debt, you would have grounds to file a lawsuit. However, if the debts in question are child support monies, spousal support or payments ordered as part of a criminal proceeding, an automatic stay does not protect these assets. 

Foreclosure, property liens, asset repossession 

If an automatic stay goes into effect when you file for bankruptcy in Minnesota, it can prevent lenders from foreclosing on your home, as well as from placing a lien against your property. A stay may also prevent repossession of an asset, such as your vehicle.  

A first logical step to take to secure debt relief and protect your assets is to determine which bankruptcy program best fits your immediate needs and ultimate financial goals. If you’re filing as an individual, you’ll want to begin by learning more about Chapter 7 and Chapter 13 programs.