Automatic Stay in Alabama Bankruptcies

The automatic stay is a federal bankruptcy injunction that generally begins when a bankruptcy petition is filed. It prevents many creditors from starting or continuing collection activity against the debtor or property of the bankruptcy estate.

In most cases, the automatic stay begins immediately when the bankruptcy petition is filed. Limitations may apply when a debtor had one or more bankruptcy cases dismissed during the previous year.

The automatic stay generally applies in both Chapter 7 and Chapter 13 cases. Its duration and practical effect may differ depending on the chapter filed, prior bankruptcy cases and creditor actions.

The automatic stay generally prohibits creditors from calling, sending collection letters or otherwise attempting to collect qualifying pre-bankruptcy debts after receiving notice of the bankruptcy filing.

The automatic stay generally stops garnishment of wages for qualifying debts after the bankruptcy case is filed. The creditor, collection attorney and payroll department should receive prompt notice of the filing.

Filing bankruptcy before a completed foreclosure sale may temporarily stop the sale through the automatic stay. Chapter 13 may allow an eligible homeowner to propose a plan for catching up on mortgage arrears.

The automatic stay may temporarily prevent a lender from repossessing a vehicle after a bankruptcy case is filed. The secured loan must still be addressed through the applicable bankruptcy process.

A bankruptcy filing does not necessarily require a creditor to immediately return a vehicle repossessed before the petition was filed. The result depends on timing, applicable law and the facts of the case.

The automatic stay generally stops the filing or continuation of lawsuits seeking to collect qualifying debts that arose before bankruptcy.

The automatic stay may stop further levy activity after bankruptcy is filed. Recovering funds already removed or frozen may depend on timing, available exemptions and other legal issues.

Bankruptcy may temporarily prevent a utility company from disconnecting service because of an unpaid pre-bankruptcy bill. The utility may require a deposit or other assurance of future payment.

The effect of the automatic stay on an eviction depends on the status of the landlord’s case. Important exceptions may apply when the landlord obtained a possession judgment before bankruptcy.

The automatic stay does not stop every action involving child support, alimony or other domestic-support obligations. Many proceedings to establish or collect domestic support are excepted from the stay.

The automatic stay generally does not stop criminal proceedings. Related efforts to collect money may raise separate bankruptcy issues.

The automatic stay may stop many tax-collection actions, including certain levies. Tax audits, assessments, notices and some governmental proceedings may continue.

A creditor may file a motion for relief from the automatic stay. The bankruptcy court decides whether the creditor has established grounds to continue collection or recover collateral.

When one bankruptcy case was pending and dismissed during the previous year, the automatic stay may terminate 30 days after the new filing unless the court extends it.

When two or more bankruptcy cases were pending and dismissed during the previous year, the automatic stay may not take effect in the new case unless the bankruptcy court imposes a stay.

Provide the creditor with the bankruptcy case number, filing date and attorney’s contact information. Keep records of the contact and promptly notify your bankruptcy attorney.

A creditor that knowingly continues prohibited collection activity may be ordered to stop. An individual injured by a willful violation may be entitled to actual damages, costs and attorney fees.

The duration depends on the case, the property involved and prior filings. The stay may end when the case is dismissed or closed, when discharge is granted or when the court grants relief from the stay.

No. The automatic stay temporarily restricts many collection activities. A bankruptcy discharge determines whether qualifying personal liability is ultimately eliminated.

Creditors listed in the bankruptcy schedules and creditor mailing matrix generally receive notice from the bankruptcy court. Urgent creditors may also need immediate direct notice.

A debtor may need to continue certain post-filing payments, particularly on a home or vehicle the debtor wants to keep. Payment decisions should be discussed with a bankruptcy attorney.

Ferguson & Ferguson can evaluate whether bankruptcy may stop collection activity, file the appropriate case, notify urgent creditors, respond to motions for relief and review possible automatic-stay violations. Call the Huntsville office at 256-534-3435 or the Decatur office at 256-350-7200 to discuss your options.