There is nothing fun about being in debt. It gets scary for people when they start to think about bankruptcy. Often, people who come into my office are at a loss, trying to decide what they need to do. The good news is, filing bankruptcy can help you by protecting you. In addition to an eventual discharge of the debts, which means that they go away completely, bankruptcy gives you immediate protection from any sort of act to collect ANY debt at all.
There is a law in Minnesota and other states classified under US CODE-2011-title 11 Bankruptcy called, “Automatic Stay”. It’s listed under section § 362. It stops creditors from being able to take further collection efforts against you. The automatic stay even works on the sorts of debts that survive bankruptcy like student loans and loan that have collateral. It stops student loan garnishment, and temporarily stops vehicle repossession and home mortgage foreclosure. This can be very useful to people who need some time without debt payments to get back on their feet.
The question for most people who come to Walker & Walker Law Offices, PLLC, is how does it affect bankruptcy in Minnesota.
How Does the Automatic Stay Work?
As soon as you file a Chapter 7 or Chapter 13 bankruptcy petition, you’re protected from creditors. A “stay” is put in place that prohibits creditors from taking or continuing action against you in an attempt to clear your debt. This means that they cannot take property or money from you, the debtor. You will be able to start rebuilding your life soon.
The tricky part is for most people, trying to remember which creditors the stay may apply to. You must list all your debts and any collection attempts before you proceed with filing your petition. This will enable it to be listed as a part of the estate and notices will be sent to all the people you owe money to.
Once notified of your petition for bankruptcy, creditors cannot harass you in any way. This means that they cannot:
- Garnish Your Wages
- Send Bills or Letters
- Initiate Lawsuits
- Call Neighbors or Friends to Seek Money or Contact with You
- Seize Assets
- Levy Bank Accounts
Does the Stay Cover Everything?
There are some circumstances that are not covered by a stay. Circumstances that you may still be responsible for include:
- Family Support Obligations. If you owe child support or alimony at the time of bankruptcy you will still be held responsible. This also includes divorce settlements and decrees.
- Fines and Restitution for Criminal Charges. If you have current legal issues, you may have to continue paying on time. If you fail to comply you could suffer penalties. At times, embezzlement, larceny, or fraud debts may be exempt as well, though this requires a judge to allow it.
- The automatic stay goes away eventually. In chapter 7, it lasts for 3 months, but can be shortened if a creditor asks the court for it and has a good reason for it. In chapter 13, it lasts for the full 3-5 years unless the creditor has a good reason to ask for it to be shortened. The most common reason for shortening it is if the mortgage payments aren’t being made.
Protect Your Financial Future
Bankruptcy is challenging, but it is the light at the end of the tunnel for many people. It can improve your credit score and make it possible for you to live the life you wanted before debt. An automatic stay is an appealing reason to proceed with filing bankruptcy. It will get most creditors off your back.
There are laws in place that protect you from debt collectors for long enough that you can get your head above water. Unless:
- The Judge Lifts the Stay
- The Debtor Gets a Discharge
- The Case Closes
- Or the Property is No Longer Part of the Estate.
If a creditor violates the stay by continuing to harass you, then they can get into trouble.
All negative credit problems end when you have a quality bankruptcy team backing you. At Walker & Walker Law Offices, PLLC, we understand what can happen to put you in debt. We want to help you get back on your feet. We have locations in Minneapolis, Brooklyn Park, St. Paul, or Blaine.
You can contact us anytime. We do not charge for consultation or advice. If you call us after hours, we will return your call the next day. Evening, weekend, and phone conferences available. We return emails and form submissions immediately during business hours. Let us help you get a fresh start and rebuild your credit TODAY!