What Is The Automatic Stay, And Why Do You Love It?
January 6, 2007
When I was a kid I used to play a game called “Red Light, Green Light, 1-2-3″. Someone would cover their eyes and everyone would begin to approach. Then, when the person called out, “Red Light, Green Light, 1-2-3″ and turned around, everyone would stop. The people who didn’t stop in time were called out, and lost the game.
Just like the bankruptcy laws!
See, there’s a thing called the “automatic stay” that exists in bankruptcy. You can think of it just like a giant, grown-up game of “Red Light, Green Light, 1-2-3.” The minute your bankruptcy case hits the courthouse door (or, more likely, the minute the computer system receives it) all creditors must stop taking any action of any sort against you. And if you’ve filed a Chapter 13 case, the creditors cannot even take action against any co-debtor.
For you, it means the phone calls and letters stop. Lawsuits stop. Foreclosures stop. You name it, it stops. Heck, the creditors can’t even send you a birthday card once your case is filed.
Pretty powerful stuff, I think.
There are some limitations to the automatic stay depending on your case, and creditors can ask the court for permission to be excused from the limitations imposed by it. But for the most part, it’s absolute and straight-forward.
If a creditor or bill collector contacts you during your bankruptcy case, you have the right to sue and recover not only money damages but also legal fees. That’s right, the offending creditor can be forced to pay you and your lawyer when they violate the law.
In spite of this, I see creditors violate the automatic stay on a regular basis. Why? Because creditors don’t think you’re smart enough to call your lawyer. And they don’t think your lawyer is smart enough to do anything about it.
But you know better than that. You won’t let them get away with it. And neither do I.
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