How the Automatic Stay Impacts the Bankruptcy Process

When it comes to the process of bankruptcy, many consumers can feel easily overwhelmed and concerned at how quickly their creditors are going to acquire their debts. However, the automatic stay process can help consumers gather their financial information together while their bankruptcy case is open. Here, the consumer and small business bankruptcy attorneys at Grossbart, Portney & Rosenberg, P.A. discuss the automatic stay, and how it can impact your bankruptcy process.

An Overview of the Automatic Stay

It is important to note that an automatic stay does not stop creditors from coming to collect debts. However, this is a federal measure that is used to immediately halt the collection of debts for creditors. If you are considering filing for bankruptcy, it is also important to note that debtors are able to file under personal bankruptcies, such as Chapter 7 or Chapter 13, as well as Chapter 11 business bankruptcy. An automatic stay can be filed as soon as you officially file for bankruptcy, and prevents creditors from collecting “pre-petition” debts, or debts you incurred before filing for bankruptcy. The automatic stay can be particularly beneficial to familiarize yourself with if you are on the fence about filing for bankruptcy. For many debtors, the overwhelming fear of aggressive creditors prevents them from beginning the bankruptcy process, however, this is likely to harm the debtor even more, making it excessively difficult to achieve financial freedom afterward. With the help of a qualified bankruptcy attorney, such as those at Grossbart, Portney & Rosenberg, P.A., you will have a team of knowledgeable professionals helping you work through the many intricacies that bankruptcy poses. 

Realize an Automatic Stay Has Its Limits 

While an automatic stay can be extremely beneficial for many individuals that find themselves in debt, it is vital that you understand its limits before you enter into the bankruptcy process. While an automatic stay prevents creditors from coming for pre-petition debts, this does not cover any additional debts or other legal ramifications that occur during bankruptcy. For example, financial issues such as tax proceedings, divorce proceedings, criminal investigations or any work to continue or adjust child support or alimony will not be covered under an automatic stay. One of the biggest things to remember about the automatic stay is that it is a temporary relief given at the beginning of your bankruptcy process. After your bankruptcy case is dismissed or closed, the automatic stay will no longer be in effect, and you will be responsible for repaying the remainder of your debts and returning to normal financial standing. By taking a comprehensive approach to your bankruptcy process along with the help of professionals, it is likely that you will be able to develop a strategy to regain financial standing in a timely manner. 

Creditors Can Face Repercussions if Automatic Stay is Violated 

Finally, debtors should know that there are excessive repercussions for lenders and creditors who violate a valid automatic stay order. For example, if a creditor seeks to repossess assets such as your car or home during the period that the automatic stay is in effect, this will be declared invalid and the creditor will face a hefty penalty. On a smaller scale, even creditors sending collection letters after an automatic stay is legitimately filed can allow the court to impose penalties as they see fit. However, debtors should also know that creditors do have the right to petition to lift an automatic stay for a few reasons. The most common reasoning behind lifting an automatic stay comes if the creditor can prove that the assets you are protecting are not specifically interfering with the debts that they need to pay back. 

Learn More About the Automatic Stay with Our Team of Baltimore Bankruptcy Attorneys 

Bankruptcy can be an extremely stressful time, regardless of if it is for personal or business reasons. During this time of the novel coronavirus, many individuals and small businesses have suffered financially, and do not know where to turn next. If you are a Maryland resident or small business owner, considering seeking the help of an attorney such as those at Grossbart, Portney & Rosenberg, P.A.for assistance in filing your bankruptcy case. We understand that each case is unique, which is why we take a comprehensive approach to guide every client through an effective bankruptcy strategy, so they can return to their normal life. To learn more about how our Baltimore bankruptcy attorneys can help you, contact our office today.