What Is The Automatic Stay? How To File Bankruptcy In Tennessee And Stop Collections
What is the Automatic Stay? How does the Automatic Stay protect you when you file bankruptcy? James Flexer, Bankruptcy attorney in Nashville, Tennessee, and owner of the Law Offices of James Flexer, explains how the Automatic Stay protects you from the moment you file your bankruptcy petition with the U.S. Bankruptcy Court.
It’s a federal statute: 11 United States Code 362. Now the automatic stay is the law that makes creditors instantly stop trying to collect debt from you as soon as you file bankruptcy. The automatic stay is what is called “injunctionary relief.” And by “injunctionary,” what it does is it prohibits or stops creditors from being able to take any action against you or else they will be in violation of the automatic stay.
Now it’s kind of like a restraining order, which some people may be familiar with from divorce or domestic cases, where an individual is restrained from taking any further action against, let’s say, a husband or wife. Well the bankruptcy automatic stay is similar in that it restrains the creditor from taking any action whatsoever against you, unless they can get permission of the bankruptcy judge to do so. But in order to get permission from the bankruptcy judge, they have to file a motion for relief from the state or request permission from the judge to allow them to try to collect from you.
Now normally, when you file a bankruptcy (and they are electronically filed now), as soon as we electronically file it with the federal government, they assign your case a case number. As soon as that case number is assigned to you, there is an automatic restraining order that’s put into place. But you do not have to go file for a restraining order; it’s automatic upon filing the bankruptcy. If any creditor does attempt to collect from you after they know about the bankruptcy, and sometimes even without knowledge of the bankruptcy, they are in violation of the automatic stay. If they know about the bankruptcy and still try to contact you, ordinarily our judges will sanction or assess penalty or attorney fees against them for those prohibited acts.
Now if they don’t know about it, the judge will normally call that a technical violation and be less inclined to sanction them. But they are still in violation of the law and cannot do that. If any of your creditors call you after you file bankruptcy with us, you should immediately call our office so we can contact that creditor and advise them that they’re breaking the law and that we may very well take action against them.
The automatic stay– let’s shift gears for a moment, because the automatic stay also places kind of like a force-field over all of your property. As soon as you file bankruptcy, it’s kind of like your watching a movie and everything has to freeze. I use those examples to explain that when you file a bankruptcy, the second you file it, there is once again a restraining order that affects every single creditor that says, “You can in no way take any of this debtor’s property. You cannot take action to get their property. You cannot sue them. Anything you do has to go through bankruptcy court.” Now that is important, because when your property is under the automatic stay, even a person who is not a creditor is still subject to the automatic stay.
Your property becomes property of the United States government; it becomes property of the bankruptcy estate until the bankruptcy trustee abandons the property. Now that doesn’t mean that someone is going to come in and take all of your property. It means that your property is protected by the federal law and by, essentially, being in a federal bankruptcy estate, and that only a bankruptcy judge can direct anyone to deal with property of that estate. So while that is happening, you are safe. And you and your attorney can determine whether you want to keep certain property, whether you want to give it back, and can of course determine what you wish to do with your property.
I’ve spoken briefly about the automatic stay. We will talk in greater detail about it in future videos, but it is one of the primary and most important laws in bankruptcy, and it has an immediate impact on every single case that is filed. Thank you for your time. I wish if you would like to request books from us, please go to our website, www.flexerlaw.com, or call our office. We will be happy to mail you books on Chapter 13 and Chapter 7, which will help you make an informed decision.