How Long does the Automatic Stay in Chapter 13 Bankruptcy Last?
One major benefit of filing Chapter 13 bankruptcy is the automatic stay. When you file for bankruptcy, all of your creditors are obligated to stop any action against you or your property. Most people file Chapter 13 to stop a repossession or foreclosure, so this is a powerful piece of the relief available to you.
The automatic stay prohibits creditors from beginning or continuing lawsuits, possessions, foreclosures, placing levies or garnishments against your paycheck. Subject to some limitations for repeat filers, this can give you the breathing room you need to begin to get your financial affairs in order.
The automatic stay remains in effect until one of the following occurs:
1. a judge lifts it at the request of a creditor;
2. you receive a discharge; or
3. your bankruptcy case is closed.
In Chapter 13 bankruptcy, the stay typically remains in effect for as long as your repayment plan is in effect. Once your Chapter 13 Plan is finished, the stay is replaced by the more permanent discharge. In other word, that which is temporary during the case becomes permanent once the case is completed.
Overall, the automatic stay offers a wide range of protection against creditors who are trying to collect money from you. Annoying phone calls and collection letters will stop. In fact, all collection efforts have to stop. This will allow you the time it takes to get your Chapter 13 Plan confirmed and a payment stream going to your creditors.
In that way, it's been said that the automatic stay is for the protection of your creditors as well as for you. Without the stay, creditors would be grabbing your assets before the court has a chance to confirm your Plan and establish an orderly payment stream. To look at it that way isn't something you're likely to do, but your creditors appreciate the ability to get a piece of an orderly pie as opposed to scraps from the circling vultures.
The automat stay does have exceptions. An individual creditor may ask the court for permission to lift the automatic stay as to that particular creditor. In the context of a Chapter 13 bankruptcy, the creditor (usually a mortgage or car lender) will ask the court for permission to lift the stay if you miss a post-petition payment. Lifting the stay as to a single creditor doesn't necessarily end the entire case for you, unless that single creditor was the one you were looking to hold at bay.
There are some legal proceedings that are not stopped by an automatic stay. Criminal proceedings, domestic support or child support actions, collections against any property that doesn't belong to your estate, and tax audits may continue during an automatic stay. All other debts - target="_blank">even those such as student loans that will not be discharged - must wait in line for either payment through your Plan, discharge or dismissal.
Jay S. Fleischman is a bankruptcy lawyer who sues bill collectors and credit reporting agencies for violations of the automatic stay. Catch up with Jay on Twitter for a steady stream of helpful information on personal finance, debt and credit.
