What the Automatic Stay Can and Cannot Do

 

One of the immediate benefits of filing bankruptcy is the relief that the Bankruptcy Code’s “automatic stay” gives to a debtor. The automatic stay brings all collection efforts against the debtor to a screeching halt. It prevents creditors from collecting on their debts until discharge, the case is closed, or the stay is lifted. The automatic stay goes into effect immediately— without need for a court order —and it applies to all of the chapters of the Bankruptcy Code. It has a very broad reach. But it’s reach is not limitless.

As you might expect, there are many things the automatic stay can do, but there are also some things it cannot do.

Let’s take a closer look at the powers of the automatic stay.

What the Automatic Stay Can Do.

The automatic stay is found in Section 362 of the Bankruptcy Code. It prevents creditors from taking pretty much any action outside the supervision of the bankruptcy court that would give one creditor an unfair advantage over any other creditor.

Here are just two of the things the automatic stay prohibits:

  • Anyone from bringing or continuing any judicial, administrative, or other action or proceeding against the debtor that either was commenced before the bankruptcy was filed, or which could have been commenced before the bankruptcy was filed.
  • Enforcement of a pre-petition judgment against the estate (i.e., the bankruptcy estate), property of the estate, or the debtor. It prohibits all collection activity including: levies, garnishments, restraining notices and all post-judgment collection remedies.

What the Automatic Stay Cannot Do.

While the automatic stay applies to many actions against a debtor, as we said, it is not limitless. Here are just three things that the automatic stay cannot do:

  • Stop criminal proceedings. The automatic stay does not apply to criminal proceedings or criminal investigations against the debtor.  
  • Prevent tax audits or some actions to collect taxes. The automatic stay does not apply to prevent tax audits, notices or demands. It does not prevent all acts to collect any tax, or to enforce, create or perfect any tax lien. It doesn’t restrict the government from continuing with any tax audits. It won’t prevent the issuance of notices of tax deficiencies or a demand for tax returns or tax assessments.
  • Last forever. Generally, the automatic stay terminates on the happening of one of these events:

1. The case is dismissed;
2. The case is closed;
3. A discharge order is entered or denied by the court;
4. The property is no longer property of the bankruptcy estate; or
5. An order is entered that terminates, vacates or modifies the automatic stay.

Understanding the automatic stay— its reach and its limits —is very important. We have attorneys in Portland, Eugene, Coos Bay, Medford, and a number of other cities in Oregon and in Vancouver and the Tri-Cities in Washington, who can explain the reach of the automatic stay to you.

We Are Here To Help You.

If you are looking for relief from collections calls and creditors coming after you, the automatic stay may give you the break you need. We are experienced bankruptcy attorneys with offices in Washington and throughout Oregon. We offer free consultations, reasonable fees, and are committed to getting our clients the relief they need. To set up an appointment, call us toll free at: 1-800-682.9568 or contact us through our website.

Is Bankruptcy a Shield Against Medicare/Medicaid Termination for Healthcare Providers?

Medicare and Medicaid payments make up a significant amount of total revenue for many healthcare providers. The question of whether a federal or state agency can terminate a Medicare or Medicaid provider agreement for a healthcare provider going through bankruptcy is an important one. So far, the answer is a conditional yes depending on jurisdiction and how the bankruptcy court attempts to stop the termination.

A bankruptcy court has two ways it can attempt to halt the termination: through an automatic stay pursuant to the Bankruptcy Code, or by ordering an injunction to maintain the status quo throughout the bankruptcy proceedings (thus keeping the provider agreement in place at least temporarily). An automatic stay is simply an automatic injunction that prevents creditors from taking actions to collect debts from a debtor who has declared bankruptcy. However, there are certain statutory exceptions to an automatic stay, including one for actions falling within the government’s use of “police and regulatory power.”

Regarding the second method (a separate court-ordered injunction), there is some question as to whether government actions pertaining to the Medicare and Medicaid Act are even within a bankruptcy court’s jurisdictional powers to begin with.

The Eleventh Circuit Court of Appeals (encompassing Florida, Georgia, and Alabama) has addressed the question of jurisdiction. According to the Eleventh Circuit, a bankruptcy judge does not have the authority to stop a government action related to the Medicare and Medicaid Act.

As to the automatic stay, the First Circuit Court of Appeals (encompassing Maine, New Hampshire, Massachusetts, and Rhode Island) found that the government could still terminate the Medicare and Medicaid provider agreements based on the statutory exception for police power. Meanwhile, the Supreme Court has so far not taken the opportunity to weigh-in.

As things stand now, there are only two definitive answers to the question of whether bankruptcy is a shield against the government terminating a provider agreement: maybe, and wait and see.

Can My Car Get Repossessed During Chapter 7 Bankruptcy?

Catch-22 situations can present themselves when financial difficulties arise. One of them is the matter of transportation to and from work. Let’s say that you fall behind on your car payment because you are having monetary problems, and your vehicle is repossessed. Without a car, you may find it hard to get to work on time or complete a successful job search if you are unemployed. You lost the vehicle due to a lack of resources, but it will be even more difficult to satisfy your creditors without transportation. If you find yourself in this position, a Chapter 7 bankruptcy filing can provide a solution.

As soon as you file for Chapter 7 bankruptcy, you get an automatic stay. This means that your creditors cannot try to collect debts for a prescribed period of time while the bankruptcy process is underway, so your car can not be repossessed. However, the lender who holds the note on the vehicle can file a motion to get permission from the judge to repossess.

If you were behind on the payments when you filed the bankruptcy, you can potentially make arrangements with the lender to bring the payments current. After this is done, you will be able to retain possession of the car after the bankruptcy was finalized. Redeeming a vehicle is another interesting possibility. When you file a Chapter 7, you may be able to redeem the car by paying the lender the fair market value, even if it is far less than the amount that you owe on the car.

Chapter 7 Bankruptcy Can Free Up Resources

You may find it hard to pay your car payment because you have unmanageable credit card debts or medical bills. If you can get out from under these unsecured debts, you will have the money you need to make your car payments on time. If you were to file a Chapter 7 bankruptcy, the unsecured debt will be discharged. However, as long as you are current on your car payment, you will be allowed to keep the car (unless you had a great deal of equity in the vehicle).

We have offices in numerous different cities in Oregon and Washington, including Eugene, Portland, Medford, and Salem. If you will like to discuss a potential Chapter 7 bankruptcy filing with one of our attorneys, we will be more than glad to assist you. You can set up a free consultation right now if you call us toll-free at 1-800-682-9568.

Can Bankruptcy End a Garnishment?

If your wages are being garnished by a creditor, your life can become very difficult. After all, if you were in a comfortable financial situation, you never would have fallen behind on your debts in the first place. The last thing you need is to see a smaller number every time you receive a paycheck or a direct deposit from your employer. While this is going on, you probably have other debts you must pay, so you have to try to do more with less. The situation can be impossible to manage, but the good news is that there are legal steps that you can take to end a garnishment to create some financial space for yourself.

Bankruptcy can provide a host of benefits, and a filing can have an immediate positive impact. When you file for bankruptcy, you receive an automatic stay right away. This stops most creditors from proceeding with their collection efforts. As a result, let’s say that you fall behind on your credit card debt, and the credit card company files a lawsuit against you. They receive a judgment from the court, and it includes a wage garnishment.

If you file for a Chapter 7 bankruptcy, you would get an automatic stay. This disallows most types of creditors from seeking payment as long as the stay is in effect. It would extend to the wage garnishment the court imposed as part of the judgment. With a Chapter 7 bankruptcy, unsecured credit card debts can be discharged by the court after the stay is lifted, so the garnishment would end permanently if the debt is discharged.

While it is true that a bankruptcy filing can put an end to a garnishment, it is not necessarily going to be the right choice under all circumstances. You have to remember that a Chapter 7 will remain on your credit report for 10 years, and it will be very difficult for you to get lines of credit at reasonable interest rates.

The decision can be a difficult one, and this is why it is wise to explore all your options with the benefit of professional legal counsel. As bankruptcy attorneys, we hear a lot of the same feedback from our clients after we have helped them get back on track. Though they are quite relieved, many of them share a common regret: They wish that they had reached out to us sooner.

Indeed, seemingly insurmountable problems can be quickly and efficiently addressed if you have strong advocacy by your side. We have offices in Portland, Grants Pass, Medford, and several other metropolitan areas in the state of Oregon, and we also have offices in Tri-Cities and Tacoma, Washington. If you would like to schedule a complimentary, no obligation case evaluation, send us a message through our contact page and we will get back in touch with you to nail down an appointment time.