Automatic stay in Bankruptcy
The protection offered by bankruptcy is known as the automatic stay. The automatic stay takes effect immediately upon filing for bankruptcy. This legal protection prevents those owed money by someone filing for bankruptcy from taking any collections actions. Those owed money may not call, send letters to or pursue legal actions against a bankruptcy filer. Any legal actions currently pending are dismissed and the resulting post-judgment recovery methods such as attachments or garnishments obtained after the bankruptcy filing must be reversed.
The process of filing for bankruptcy is efficient using electronic filing. No longer must attorneys “rush to court” to obtain a date and time stamp. Bankruptcy petitions can be filed twenty-four hours a day from the comfort of the attorney’s office. Unfortunately, efficient modern technology has not caught up with the process of notifying creditors of a bankruptcy. While the filing fees have increased in recent years, the bankruptcy court still mails out notice of the creditors’ meeting scheduled by regular mail. Thus, there might be a lapse in time of more than a week before a creditor gets notice, during which time they may have taken one of the recovery actions described above. However, by law, these actions taken after the date of the bankruptcy filing must be reversed immediately after the receipt of notice of a bankruptcy filing. Wages garnished should by law be credited back to the wage earner and attachments on property be lifted. As always you should contact an attorney in your jurisdiction if you have questions, as each individual case is different.
