A Stay and A Discharge
What do they mean?
The Automatic Stay
When you file for bankruptcy, something called the “automatic stay” immediately stops any lawsuit filed against you and most actions against your property by a creditor, collection agency, or government entity. Especially if you are at risk of being evicted, being foreclosed on, being found in contempt for failure to pay child support, or losing such basic resources as utility services, welfare, unemployment benefits, or your job (because of a raft of wage garnishments), the automatic stay may provide a powerful reason to file for bankruptcy.
What the Automatic Stay Can Prevent
- Utility Disconnections
- Collection of Overpayments of Public Benefits
- Multiple Wage Garnishments
What the Automatic Stay Cannot Prevent
In a few Instances, it won't help you:
- Certain Tax Proceedings
- Support Actions
- Criminal Proceedings
- Loans From a Pension
- Multiple Filings
How Creditors Can Get Around the Automatic Stay
Usually, a creditor can get around the automatic stay by asking the bankruptcy court to remove ("lift") the stay, if it is not serving its intended purpose. For example, say you file for bankruptcy the day before your house is to be sold in foreclosure. You have no equity in the house, you can't pay your mortgage arrears, and you have no way of keeping the property. The foreclosing creditor is apt to run to court soon after you file for bankruptcy, to ask for permission to proceed with the foreclosure -- and that permission is likely to be granted.
When you file for bankruptcy, a "discharge" is when you are legally free and clear of any obligation to repay certain debts. Your creditor no longer has any right to collect that debt, and you no longer have any obligation to repay it.
Debts Not Dischargeable in Bankruptcy
Certain debts are not dischargeable under Section 523 of the Bankruptcy Code. If a debt is “excepted from discharge,” the debtor will still be liable on that debt after bankruptcy. Some “exceptions to discharge” are automatic. Other exceptions to discharge must be determined in an adversary proceeding. An experienced bankruptcy practitioner can help you sort through the issues related to debts that may be excepted from discharge.
Debts that are not dischargeable include the following:
- Debts for certain taxes
- Debts for money, services, or property obtained using false pretenses, false representation, actual fraud, or false financial statements
- A debt for purchasing luxury goods and cash advances within ninety days prior to the bankruptcy filing
- Debts that a debtor fails to list in the bankruptcy schedules
- Debts arising from fraud while acting in a fiduciary capacity; embezzlement, or larceny
- Debts for alimony and child support, and other obligations arising out of a divorce or separation
- Student loans
- Restitution orders
- Debts arising from willful and malicious injury by the debtor to another person or another person’s property
- Debts arising from death or personal injury caused by the debtor’s operation of a motor vehicle while the debtor was intoxicated or under the influence of an illegal substance