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Stopping foreclosures in bankruptcy

One of the greatest powers a court has is found in 11 USC 362 of the United States Code in what is commonly referred to as the Automatic Stay.

Once a person or company files bankruptcy under any chapter, immediately, without any request from a Bankruptcy Judge, the protection of 11 USC 362 kicks in. The automatic stay surrounds a debtor with a layer of protection that enjoins every Court in the United States, every collection agency, every collection lawyer, finance companies, even the IRS from doing anything adverse to the debtor. The protection is instantaneous and remains in place until ordered by the Court. There are always exceptions to every rule, and the automatic stay will not stop everything bad that is happening to the debtor. For instance, the automatic stay will not stop a criminal court from prosecuting you (even if it is related to a civil matter). It will not stop a custody judge from putting you in jail for contempt of court for violating a child support order and in some cases it will not stop an eviction (or if it does it may be a short lived reprieve). It will also not stop a divorce judge from entering a final decree of divorce. If you review 11 USC 362, there are so many exceptions, it would be impossible to discuss them in a single blog post. However, for the most part, the general rule is that if something is entirely civil in nature (money or the collection of it), and is not related to a domestic relations issue, than if you file bankruptcy, you are going to get the protection of the Bankruptcy Court. The most common protections most debtors need when they file bankruptcy are to stop a foreclosure, a garnishment or repossession. Also, most debtors enjoy the benefits of collections agency being enjoined from constant creditor harassment. Once we file a bankruptcy for a client, the Court sends bankruptcy notices to all creditors letting them know that a case is pending, that all actions are frozen until the Bankruptcy Court sorts through the case. In emergency situations, the bankruptcy attorney will usually fax the notices to foreclosure attorneys or other entities that need to be addressed immediately. There are serious penalties to anyone who willfully ignores the automatic stay.  I have seen Bankruptcy Courts throughout the country award damages to an injured debtor against creditors for thousands of dollars. In one egregious case, I saw the Judge tell a secured auto lender that repossessed a car after a bankruptcy had been filed that because they violated the automatic stay willfully, that the entire lien against the car would be stripped off and discharged in bankruptcy. In that case, the debtor got the car free and clear and the creditor learned a valuable lesson not to trample on one of the most important rights a debtor has in bankruptcy. If you are facing a foreclosure, IRS levy, garnishment or repossession, a bankruptcy can help stop that from happening. While bankruptcy is not the cure for every ill, in almost all situations, filing bankruptcy can let you grab control of your finances, get rid of things you cannot afford and reorganize things that are necessary in going forward. 

My name is Timothy Anderson. I have been a bankruptcy attorney for 14 years and would be happy to help discuss with you what options are available to address your situation. Please contact me at 757-301-3636 if you would like to discuss your issues further.

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