The Bankruptcy Automatic Stay

Long & Long Team — Tue, 20 Jul 2021 23:42:00 GMT

One of the best bankruptcy protections afforded a debtor from his or her creditors is the automatic stay. In what ways does the automatic stay stop creditor actions and when does it not protect the debtor?

Debtor Protection Under the Automatic Stay

Once the bankruptcy case is filed an automatic stay under 11 U.S.C. §362 goes into effect. The result of the filing is that creditors and other entities are prevented from:

Commencing or continuing judicial and administrative proceedings against the debtor that was or could have been commenced before the case was filed.
Enforcing a judgment against the debtor or property of the estate.
Acting to obtain possession of, or control of, property of the estate.
Creating, perfecting, or enforcing any lien against the property of the estate.
Creating, perfecting, or enforcing any lien against the property of the debtor to the extent the lien secures a claim that arose before the commencement of the bankruptcy case.
Acting to collect or recover a claim against the debtor that arose before the commencement of the bankruptcy case.
Setting off any debt owing to the debtor that arose before the commencement of the bankruptcy case with a claim against the debtor.
Commencing or continuing a proceeding against the debtor before the United States Tax Court under specific circumstances.

These are very broad protections for the debtor in the debtor’s quest for a fresh start. Most important to debtors is it stops lawsuits, wage garnishments, bank garnishments, auto repossessions, most evictions, and home foreclosures. Violation of the automatic stay may result in contempt of court proceedings. However, there are exceptions to the automatic stay.

Exceptions to the Automatic Stay

The filing of a bankruptcy case does not operate as an automatic stay in the case of:

Criminal proceedings against the debtor.
Commencing or continuing paternity actions, modifying domestic support obligations, child custody or visitation actions, domestic violence actions, and divorce proceedings (except to the extent the divorce proceeding seeks to determine the division of property of the bankruptcy estate).
Collecting a domestic support obligation from property that is not the property of the bankruptcy estate.
Garnishments for domestic support obligations.
Suspending or restricting driver’s licenses, professional and occupational licenses.
Under specific sections of the Social Security Act, reporting overdue domestic support to a credit reporting agency, intercepting a tax refund, or enforcing a medical obligation.

Other exceptions too numerous for this article also apply. For a creditor to obtain relief from the automatic stay they usually must file a motion for relief from the automatic stay. This allows the Court and parties in interest an opportunity to analyze the appropriateness of the proposed relief.

If you have questions on how the automatic stay may affect you or your business, have them reviewed by an experienced bankruptcy attorney and former trustee for the U.S. Bankruptcy Court. Call or contact Martin Long at LONG & LONGnow at 303-832-2655, or www.denverbankruptcylawyer.net.

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Are Divorce Debts Discharged in Bankruptcy?

Long & Long Team — Wed, 04 Nov 2020 21:03:00 GMT

The question often arises to what extent are divorce debts discharged in bankruptcy?A divorce often generates several different types of debts to a divorced person considering filing for bankruptcy. Chief among them are:

Property settlement obligations to the former spouse,
Maintenance, formerly called alimony, owed to the former spouse, and
Child support owed to the former spouse.

Domestic Support Obligations

The Bankruptcy Code exceptions to discharge of divorce debts are divided into two categories. One category is domestic support obligations. The other is property-settlement obligations.

Domestic support obligations are generally divorce debts owed to a former spouse, child, or guardian, that are in the nature of alimony, maintenance or support and established by a divorce decree or separation agreement.

Domestic support obligations are non-dischargeable in both a Chapter 7 and Chapter 13 bankruptcy.

Property Settlement Obligations

The other chief category is property settlement obligations. Virtually all property settlement obligations and other divorce related obligations are non-dischargeable in a Chapter 7 bankruptcy.

In a Chapter 13 completed plan discharge, however, the property settlement debts are discharged. This alone may be a significant reason to file a chapter 13. Thus, it is important at times to distinguish a non-dischargeable support obligation from a dischargeable property settlement obligation. The three main factors bankruptcy courts look at in determining whether it is a non-dischargeble domestic support obligation is:

The actual language and substance of the agreement;
The parties financial circumstances at the time of the agreement; and,
The function the obligation served at the time of the divorce or settlement agreement.

If the obligation served as a source of income for the former spouse at the time of the divorce, it will usually be considered a non-dischargeable support obligation.