Monday, October 10, 2011

Length of Time of Automatic Stay in Chapter 7

Most people file a Chapter 7 bankruptcy to discharge debts, and often are very concerned about long the Chapter 7 will last. The good news is many of the protections debtors are looking for when they file bankruptcy they receive upon filing with the Court.

During consultations, almost everyone wants to know how long the bankruptcy will last. This appears to be an emotional question, and as such, I usually tell them everything they will probably have to do in the case will be done during the first 30 days, and explain the trustee will ask for documents during this time, followed by a meeting with the Trustee, called a Meeting of Creditors. Then its just a sit back and wait for the discharge. But if the protection they are looking for is relief from collection activities by creditors and debt collectors, then, as to most creditors, that is immediate upon the filing of the bankruptcy petition with the Clerk of the Bankruptcy Court.

The reason creditors and debt collectors are unable to try to collect during bankruptcy is because of something called the “automatic stay”. This is a stay ofcollection activities during the bankruptcy, and usually remains in effect until one of the following occurs:
      1. a lift of the stay is granted by the court;
      2. the case is dismissed; or
      3. a order of discharge is entered by the Court.
If this is not your first bankruptcy filing, then the automatic stay may be limited in time unless extended by the Court, or not put in place at all until ordered by the Court. If you have previously filed, you should seek the advise of a local bankruptcy attorney prior to filing regarding the automatic stay, and how it applies to your particular situation.

There are situations when clients are concerned about when they will receive their discharge. This usually comes about from a creditor that really doesn't fully understand the bankruptcy process. Many times a landlord will not want to enter into a rental agreement until after the discharge has been entered. The answer to this is a discharge is usually entered in 3 to 4 months after the Meeting of Creditors, which is about 4 to 5 months after filing.

For debts that are not discharged, should there by any, the automatic stay is usually still effective during the course of the bankruptcy; however, upon the automatic stay being lifted, the creditors are then free to proceed with collection efforts as to those non-discharged debts. In this case, debtors are given some breathing room for the time the automatic stay is in place.

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