What is an Automatic Stay?

Everett bankruptcy protection help from experienced bankruptcy attorneys serving Snohomish County.

A common question that our attorneys hear from clients is, “what is an automatic stay, and how does it protect me in bankruptcy?” While you are in bankruptcy, a powerful court order is automatically put into effect to protect you from your creditors as your finances are put back in order. The court enters what is called an “automatic stay” because it takes effect automatically upon filing a petition and it stays all collection activity.

How does the automatic stay work in a Washington State bankruptcy?

The automatic stay immediately stops all garnishments, foreclosures, repossessions, phone calls, utility cut offs and other attempts to collect a debt. If a creditor violates the automatic stay, they can be sanctioned by the bankruptcy court. To be liable for sanctions, the creditor has to have actual notice of the bankruptcy filing so it is important to list the creditor’s correct address when filing your case.

If your paycheck or bank account is garnished after you file your case, any money garnished must be returned. In fact, you may be able to recover money garnished up to 60 days before you filed. The automatic stay stops foreclosures up to the time the house is sold at auction. It is even possible to recover a repossessed car up to the point it is sold at auction.

A creditor can ask the court to modify the automatic stay to repossess a car or foreclose after the bankruptcy is filed. If you are not making payments on a car or house, the creditor can modify the stay in as little as a month, though it usually takes a few months.

How is the automatic stay different in a WA Chapter 7 vs Chapter 13 bankruptcy?

In a Chapter 7, you must be current on the loan to prevent the stay from being modified. In a Chapter 13, you must propose a workable payment plan, stay current on the payments and keep the property insured. If the stay is modified, you still have defenses to foreclosure or repossession under Washington state law. It just means the bankruptcy protection is no longer in effect. Please note that the bankruptcy attorneys serving Snohomish County from our team can help explain these details more in depth during your consultation.

If you file more than one case in a year, you have to ask the court to keep the stay in effect within 30 days. If you file more than two cases in a year, the stay does not take effect at all and you have to ask the court to impose the stay. This provision exists so people do not file several bankruptcies, letting them be dismissed without discharge one after another, without a real plan to make them work.

Some collection activity is not stayed. Actions for child support can continue. The IRS can continue an audit (but not actually collect). Criminal proceedings are not stayed.

The stay allows you to reinstate a driver’s license if it was suspended for failure to pay for an uninsured accident. You may or may not be able to reinstate a license for failure to pay tickets. In Washington, you can reinstate a license for failure to pay tickets in a Chapter 13 but not in a Chapter 7.

Contact an Everett, WA bankruptcy lawyer from our team – your first evaluation is FREE!

Learn more about how the bankruptcy attorneys serving Snohomish County from our law firm can help you get protection from the automatic stay. Your first consultation with us is completely free, and we provide all of our clients with affordable flat low attorney fees. Everett bankruptcy protection and debt relief is right around the corner – call today!

(425) 249-7156