In today's economy, people from all backgrounds and walks of life struggle with debt. Endless credit card bills, medical expenses, or losing a job can cause you to suddenly find yourself in a difficult financial situation. You may feel as if you're never going to get relief and may turn to bankruptcy after all other options have been exhausted. During bankruptcy, the automatic stay is a preliminary injunction that immediately stops most lawsuits filed against you and protects your money and property from creditors. In most bankruptcy cases, the automatic stay is applied by operation of law at the exact moment of the filing of your case. However, the protection from the automatic stay may be limited or not available at all if you have filed for bankruptcy previously.
Two Bankruptcies Within One Year
If you file for bankruptcy within one year of the dismissal of your first case, the automatic stay will expire after thirty (30) days because there is a presumption that you filed the second case in bad faith. In general, when a case is considered to be in bad faith it means that there was an abuse of the bankruptcy system. If you can prove to the court that you filed your case in good faith, the court may extend your automatic stay.
Three Bankruptcies Within One Year
If you filed two bankruptcies in the previous year (12 months) and then file a third, the same presumption of bad faith exists. In this case, the automatic stay will not take effect at all in the third filing. You may be able to file a motion with the court and ask for the automatic stay to be imposed, but you need to present convincing evidence that you're filing in good faith.
What Happens When the Automatic Stay Is Not in Effect?
When you file for bankruptcy and the automatic stay is not in effect, all of your belongings become the property of the bankruptcy estate. Even if your property is protected by an exemption, meaning you get to keep it after the bankruptcy, you cannot sell or give away those items during the time your bankruptcy is pending. Individual creditors are not allowed to seize assets that are part of your bankruptcy estate because it would be unfair to the rest of your creditors. This is true regardless of whether the automatic stay is in effect.
If you are facing this very situation and you need an automatic stay to be in place to help you protect your property, the experience of your attorney will be worth its weight in gold. He or she should give you the best-case and worst-case scenarios. For example, what your course of action will be if the Judge does not impose the automatic stay? What your course of action will be if the Judge does impose the stay?
Likewise, your attorney should advise you of things you need to be concerned about going forward like any additional debt you incur after filing is not subject to the automatic stay, meaning creditors can call, bill or file a lawsuit against you if you don't pay them back. If you're filing bankruptcy for the first time, it's important to know that the automatic stay will be automatically applied, and there's no specific action that you need to take besides filing a bankruptcy petition. The automatic stay automatically applies to both Chapter 7 and Chapter 13 bankruptcy cases. If this isn't your first time filing for bankruptcy, your bankruptcy attorney will be able to advise you as to whether the automatic stay will apply to your case.