Isn’t one of the most important benefits of filing for bankruptcy that it puts a screeching halt to all collection efforts against you and your property? Yes. And in most cases it does exactly that. This benefit of filing bankruptcy is called the “automatic stay,” because at the moment your case is filed, a legal injunction automatically goes into effect “staying,” or stopping, most actions by creditors against you. But because we depend so much upon the automatic stay, we better know its exceptions.
Today I’m going to list some of the more important exceptions. Then in the next couple of blogs I’ll explain in practical terms these and other important aspects of the automatic stay.
Creditors CAN do the following in spite of your bankruptcy filing:
1. A district attorney or other governmental authority can begin or continue a criminal case against you, such as an indictment, a criminal trial, or a sentencing hearing. This includes not just felonies and misdemeanors, but also lesser matters like traffic infractions that you might not think of as “criminal.”
2. Your ex-spouse, or about-to-be ex-spouse, or somebody on his or her behalf, can start or continue a variety of divorce and family court proceedings. These include legal procedures to establish paternity of a child, determine or change the amount of child or spousal support to be paid, settle child custody or visitation issues, address domestic violence disputes, and even dissolve the marriage. (Although a marriage dissolution usually cannot include a determination about how assets or debts would be divided between the spouses.)
3. Regarding child or spousal support, the person owed ongoing support can continue collecting it. If there is back support owed, then in spite of a Chapter 7 filing, the person who is owed the support can in most cases start or continue collecting it. This includes not only collection through wage withholdings and garnishment of bank accounts, but also through seizure of a tax refund and suspension of a driver’s license, an occupational or professional license, or even a hunting or other recreational license. In contrast, a Chapter 13 filing can stop these aggressive methods of collecting back support.
4. Taxing authorities can start or finish a tax audit, can send you a notice that you owe taxes, can demand that you file your tax returns, can assess your taxes and demand that you pay them, and in some situations can even file tax liens against you and your property.
Notice that each of these exceptions involves a special kind of creditor. As I said, the automatic stay stops actions against you by most creditors. But if you are involved in a court proceeding or collection efforts by the criminal or tax authorities, or by an ex-spouse, be especially aware of these exceptions.