Living with insurmountable debt can be mentally exhausting, especially with the constant communication from creditors. If you have explored your financial options and believe bankruptcy is the right path, you will find it offers more than just debt relief. It also provides an automatic stay, which can temporarily halt creditor actions against you. To better understand this crucial protection and learn why consulting our dedicated Rapid City Bankruptcy Lawyers is essential, continue reading.
How Does the Automatic Stay Work?
Upon filing for bankruptcy in South Dakota, an automatic stay is immediately granted. This injunction requires all creditors to promptly cease collection efforts against the debtor. Actions prohibited for collectors during bankruptcy include, but are not limited to:
- Initiating lawsuits
- Contacting the debtor regarding the outstanding debt
- Continuing pre-existing lawsuits against the debtor
- Foreclosures on owned property
- Repossessions of vehicles or other property
- Wage garnishments
It’s crucial to note that an automatic stay can also reverse actions taken before its issuance. For instance, if an employer has complied with a wage garnishment order, the creditor is obligated to return the seized funds. Likewise, if a property is foreclosed and sold, but the bankruptcy filing occurred before the sale, the transaction will be deemed invalid and has to be reversed. The automatic stay will remain in effect until the bankruptcy case is concluded.
Can Creditors Still Attempt Collection?
Generally, creditors are prohibited from attempting collection activity after an automatic stay is in effect following a bankruptcy filing. Attempting to collect a debt during this period is a violation of the stay and can result in significant penalties for the creditor.
Understanding the nuances of automatic stay violations is crucial to protect your rights and interests. A willful violation occurs when a creditor knowingly disregards your bankruptcy filing and persists in collection efforts. In contrast, a technical violation might happen if a creditor is unaware of your bankruptcy case. For instance, if you receive a collection letter a few days after filing, it’s likely a technical violation if the letter was mailed before your filing. When a creditor violates the automatic stay by continuing to pursue action against you, they risk being held in contempt of court or being ordered to pay damages.
However, certain exceptions exist. A creditor can file a motion with the court to lift the automatic stay, enabling them to resume collection efforts. If the court grants this permission, the creditor is legally entitled to pursue the collection methods specified in their motion. Additionally, the automatic stay doesn’t cover all obligations. Payments such as criminal restitution or alimony to a former spouse are not halted, and you are still on the hook.
Navigating bankruptcy can be a complex process, even though it offers significant debt relief. Therefore, it’s advisable to seek guidance from an experienced attorney. At 605 Bankruptcy, we are prepared to help you through this process to achieve a fresh start. Contact us today to schedule a consultation.
