Understanding the Automatic Stay in Michigan Bankruptcy Cases

Do You Need a Helping Hand?

If you are considering bankruptcy, you have probably been weighing the pros and cons and how they will affect your life. You already know that a bankruptcy has the potential to stop the day and night phone calls from bill collectors. But were you aware that you can benefit from that as soon as you file for bankruptcy? It’s understandable if you thought you had to complete the bankruptcy process, but this benefit, plus many other benefits, automatically kick in through something called an “automatic stay.”

In fact, stopping the debt collectors from calling you is just the tip of the iceberg when it comes to an automatic stay.

Suppose you are considering bankruptcy, whether it’s Chapter 7. Chapter 13, or you’re not sure which, you should seek the guidance of a bankruptcy attorney. You may see bankruptcy as a purely financial matter, but it is actually a legal matter, meaning legal representation can make a world of difference.

What is Bankruptcy and Automatic Stay?

Bankruptcy is a legal process governed by federal law. It allows individuals who are unable to repay their debt to eliminate or restructure it, while also receiving protection from creditors. Restructuring debt is a court-approved repayment plan that modifies the terms of existing debts to make them more manageable.

An automatic stay is a court-ordered freeze that immediately stops most creditor actions, including collections, lawsuits, and foreclosure. It happens automatically; you do not have to have a hearing or get judge approval before it goes into effect.

What Does an Automatic Stay Stop?

An automatic stay is a shield that halts most collection actions the moment you file for bankruptcy. It actually stops more than just the relentless phone calls. Here are the protections you can look forward to with an automatic stay.

Creditor Harassment and Collection Calls

Once the automatic stay is in effect, creditors must stop calling, texting, or mailing you to collect a debt. If they violate this order, it can lead to serious legal penalties against them.

Wage Garnishments

If your paycheck is already being garnished to pay for unpaid credit cards, medical bills, or personal loans, the stay will immediately halt those deductions. In some cases, you may recover a portion of the garnished wages if they were taken shortly before filing.

Foreclosure Proceedings

If your home is in the process of foreclosure, an automatic stay will stop the sale, giving you time to work out a solution through Chapter 13 or explore other legal options to save or sell your home.

Repossession of Vehicles

The stay prevents lenders from repossessing your vehicles, even when you have fallen behind on payments. In some cases, it can help you get your vehicle returned to you if it has already been repossessed.

Lawsuits and Judgments

Whether you’re being sued for unpaid debts or a creditor has obtained a judgment against you, an automatic stay will pause the legal process and give you time to consider your legal options.

Utility Shutoffs

If your electricity, water, or gas is at risk of being shut off by the utility companies due to unpaid balances, the stay gives you at least 20 days of protection, ensuring you have access to these essential services.

These protections can feel like a blessing, giving you the chance to catch your breath and a break from the barrage of creditor correspondence.

What Is Exempt From an Automatic Stay?

The protections that automatic stays offer are great for regaining some control, but certain things are exempt from legal stays. Understanding these exemptions can help you understand your rights during the bankruptcy process.

• Criminal proceedings: Bankruptcy does not stop criminal prosecutions, even if they are tied to certain financial conduct.
• Child support and alimony: Both of these types of support are court-ordered and exempt from an automatic stay. If your wages are being garnished due to child or spousal support, a stay won’t stop the automatic withdrawals.
• Tax proceedings: The IRS and state tax agencies can still audit your returns, demand tax filings, and assess taxes. However, certain collection actions, like wage garnishments, are temporarily stopped.
• Loans against pensions or retirement accounts: You must continue repaying your 401(k) or similar retirement plan loans, as these repayments are not often affected by the stay.
• Multiple bankruptcy filings: If you have filed more than once within the past year, the automatic stay might be limited to 30 days or not even go into effect at all, unless you ask the court for permission.

If you are having a hard time determining what will be halted by a stay and which obligations will continue, then a Michigan bankruptcy attorney can help you understand automatic stays and guide you through your bankruptcy.

How Can a Michigan Bankruptcy Attorney Help You?

While an automatic stay is, well, automatic and immediate, creditors don’t always respect this legal mandate. A bankruptcy lawyer can ensure the stay’s enforcement and can even handle creditor motions to lift it, especially when it comes to protecting your home and vehicle. If an aggressive creditor chooses to violate the stay, we will represent you in court and help you pursue damages for their actions.

If you have already filed for bankruptcy before, you likely have concerns about whether or not an automatic stay will go into effect for your case. We will make sure you qualify for the full stay, regardless of your bankruptcy history. When working with a bankruptcy attorney, you won’t have to worry about meeting deadlines or making mistakes on important paperwork.

Call Sigal Law Firm today at 248-671-6794 to schedule a free consultation with a knowledgeable bankruptcy attorney.