The Automatic Stay Does Not Suspend All Legal Proceedings
When you seek protection against creditors by filing a personal bankruptcy petition, you immediately receive the protections afforded by the automatic stay. That prohibits your creditors from calling, writing or taking legal action against you in an effort to collect the debt (other than through the bankruptcy proceeding). Any lawsuits will be suspended and no new legal action can be initiated.
The automatic stay, however, does not apply to all types of legal action. Among the legal matters not affected by the automatic stay are:
- Criminal proceedings—If you have been charged with embezzlement, theft or other crimes, those prosecutions will not be suspended by a bankruptcy filing. In addition, you typically cannot seek to discharge a restitution order or any debt incurred through illegal activity.
- Most family law matters—Child support and alimony obligations cannot be discharged in a bankruptcy proceeding, though can use Chapter 13 to reorganize or restructure a property settlement.
It’s also important to understand that the automatic stay may be lifted with respect to certain creditors, if the court determines that doing so is in the interests of justice. For example, a creditor who stands to lose a lot of money if a property foreclosure is suspended may successfully petition the court to remove the stay before completion of the bankruptcy process. Additionally, if a creditor has initiated an eviction before a bankruptcy petition was filed, the court may allow the eviction proceeding to continue, if doing so is in the interests of justice. A government agency may also petition the bankruptcy court for removal of the stay to recover losses.
Contact Our Offices
At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.