Many attorneys are jealous of bankruptcy attorneys. Why? Because when we file a bankruptcy petition an automatic stay goes into effect in most cases. This stay stops foreclosure sales and prevents the commencement or continuation of most collection efforts. It is like magic. We file the petition and boom, creditors are stopped in their tracks. So, most of the time, we do not have to go through the hoops that a foreclosure defense attorney must go through to stop a foreclosure sale. We do not need to file an order to show cause to obtain an injunction like non-bankruptcy litigators. However, this “magical” automatic stay has its restrictions. There are over twenty exceptions to the automatic stay listed in section 362(b) of the Bankruptcy Code. When I teach the automatic stay to my class of future paralegals, I painstakingly review the exceptions to the automatic stay. Those exceptions cover the situations where a filing of a petition will not trigger the stay. Why do I do this? No, it is not to torture them. Although they may not remember each and every exception, they will be exposed to them and hopefully remember a bankruptcy filing does not act as a blanket injunction to all creditor activity. When in doubt, they will know to review the Code to make sure that a filing will give a client the relief they are seeking from a creditor's actions. Can you imagine a situation where a client files a bankruptcy petition to stop an eviction and learns that the filing did not do just that? Well, under the Bankruptcy Code, if a judgment of possession was entered in favor of the landlord, filing a petition will not stay that eviction unless additional steps are taken. Likewise, the automatic stay may have limited effect when a person has filed more than one petition within a period of a year. This is a common occurrence with individuals who are facing a foreclosure sale. For example, a person who files a second petition to stop a foreclosure sale within a year of filing a previous petition that was dismissed will receive the benefits of the automatic stay for only a period of thirty days. To continue that stay, the debtor must seek a court order. A person that has filed two or more petitions within a year will not activate the automatic stay upon the filing of a petition and must seek a court order imposing the stay. In sum, the automatic stay may be powerful but it has its limits. It is important to seek advice from an experienced bankruptcy counsel who is aware of those restrictions and can properly advise you of the effect of a bankruptcy filing.
#Bankruptcy #automatic stay
Kimberly Berson is an attorney that has been practicing for over 25 years. Her practice is focused on bankruptcy law and related litigation. She has served as an adjunct professor of legal studies and an instructor of paralegal courses. She provides debt relief for individuals and businesses. Please visit her website at kbbankruptcylaw.com. You may contact her at 516-847-5122 or kbersonlaw@gmail.com
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