The most immediate benefit of filing a bankruptcy is the concept of the "automatic stay". Pursuant to the Bankruptcy Code, the filing of a bankruptcy petition triggers an automatic stay of all legal proceedings and collection efforts against you. The stay is, in effect, an order of the bankruptcy court sent to all of your creditors advising them that a bankruptcy has been commenced. Pursuant to the stay, creditors are warned that they will be sanctioned if they try to collect money or property from you without leave of the bankruptcy court. If your home or other real estate is in a foreclosure situation, even if a sale is imminent, the stay will stop the sale. The stay will also stop a foreclosure action in its earliest stages, and prevent the lender from moving forward with a foreclosure without leave of the bankruptcy court. Because the automatic stay is such a powerful tool, the lifting of the stay is not freely granted, but may occur if you are not fulfilling your obligations.
When your banktruptcy is filed, our attorneys will immediately contact your lender or its representative and provide it with your bankruptcy information. The automatic stay will remain in effect until the conclusion of the bankruptcy case, or until lifted by the Court. If you have filed under Chapter 13 and your intention is to reinstate your mortgage, it is imperative that you begin making mortgage payments again in the month following the filing of your petition. The bankruptcy court will lift the automatic stay and allow the lender to proceed with its foreclosure if you are not making payments as promised. Likewise, in a Chapter 13 case, it is imperative that you begin making the monthly Plan payments to the Chapter 13 Trustee in the month following filing. If payments are not timely made to the Chapter 13 Trustee, the Court may dismiss the case, which will also have the effect of lifting the stay and allowing creditors to proceed with collection efforts, including foreclosure. When the stay is lifted, or if the case is dismissed, it is possible that you may not be able to file for bankrutpcy again, and get the benefit of the stay, for the next 180 days.
Our attorneys will be happy to explain how the stay works, why the stay might be lifted and what must be done while the bankruptcy is pending to assure your continued protection. Please be sure to ask our attorneys about the possibility of a loan modification in conjunction with, or as an alternative to bankruptcy as another way to save your home.
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