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How Can the Automatic Stay in Bankruptcy Protect Me From Creditor Harassment?


Thousands of Iowans are struggling to make ends meet due to the economic shock of the COVID-19 pandemic. If you suddenly find yourself behind on your mortgage, rent, car payments, or other bills, you may be wondering if bankruptcy is an option. Of course, you should always speak with a qualified bankruptcy attorney before making such an important decision. But one thing to consider is that just by filing for bankruptcy protection, you can put an immediate stop to creditor harassment and any pending collection activity against you.

What the Automatic Stay–and Will Not–Stop

Federal bankruptcy law provides for what is known as an “automatic stay.” This means that once a person files a bankruptcy petition, most legal debt collection activity against that person must stop until the bankruptcy court says otherwise. The automatic stay applies to proceedings such as foreclosure actions, evictions, utility disconnections, and wage garnishments. The stay also suspends current or pending civil lawsuits against you in state court. So if a creditor has sued you to collect money it claims that you owe, filing for bankruptcy will put a temporary halt to the case.

Now, there are certain types of collection proceedings that are not subject to the automatic stay. The stay will not stop the Internal Revenue Service from auditing you or assessing any past due taxes, although it will stop the government from issuing tax liens or seizing property. However, in some cases it may be possible to discharge any tax debt due in bankruptcy.

The automatic stay also does not apply to criminal proceedings. Let’s say you were convicted of drunk driving in Iowa and ordered to pay a $1,250 fine by the court. The automatic stay will not suspend your criminal case, and in fact you will likely still have to pay the full amount of the fine even after your bankruptcy case ends.

Finally, the automatic stay will not stop any legal proceedings with respect to paternity or family support obligations. This means that even after you file for bankruptcy, your ex-spouse can still pursue you in state court for unpaid child support or alimony. And Iowa authorities can till take action to make sure you pay an existing support obligation without approval from the bankruptcy court.

When Will the Automatic Stay End?

An automatic stay will not last indefinitely. Your creditors have the right to ask the bankruptcy court to lift the stay at any time. Secured creditors–i.e., your mortgage lender or the entity holding your car loan–often move to lift an automatic stay as soon as possible so they can resume foreclosure or repossession proceedings. But even then, the automatic stay can still buy you time.

Unsecured creditors, such as credit card companies, typically do not attempt to lift the automatic stay. If you have filed for Chapter 7 bankruptcy, most of these unsecured debts will be discharged–wiped out–once the case is complete. And in a Chapter 13 case, you are required to submit a repayment plan with the bankruptcy court, so your creditors know they will eventually get paid.

Remember, filing for bankruptcy is not an admission of moral failure. It is a legal process designed to protect individuals from increasing creditor harassment. Especially in the current economic climate, there is nothing wrong with asserting your legal rights in this area. If you need further advice or guidance from an experienced Southeast Iowa bankruptcy attorney, contact the Noyes Law Office today.




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