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There are 5 sections of the Federal Bankruptcy Code that give
protection from creditors. Chapter 7 and Chapter 13 are designed to
help consumers, like most of us, get a fresh start, free from
debt. Other sections (Chapter 9 for governmental units, Chapter 11
for reorganizing large businesses, and Chapter 12 for farms) are not
discussed on this web site.
Bankruptcy gives immediate protection from virtually all ordinary
creditors through an automatic stay. This stay goes
into effect with the filing of a bankruptcy case. [11
USC �362]
These are examples of some of the many creditor's actions stopped
by the filing of a Bankruptcy:
The stay puts creditor's actions on hold. It does
not eliminate their claim. The claims of unsecured creditors
will generally be eliminated by the discharge when the Bankruptcy is
completed (see Debt Not Discharged
for some exceptions). Creditors secured by things that you
own, such as a car or your home, will have additional rights which
will need to be handled in the bankruptcy (see Secured
Debt for more information).
Certain kinds of actions are not stopped by the filing of a
bankruptcy. These include:
- Criminal proceedings. [11
USC �362(b)(1)]
- Dissolution of Marriage (divorce) proceedings, except to the
extent that they seek to divide property of the estate. [11
USC �362(b)(2)]
- Proceedings concerning child support, visitation, paternity,
or domestic violence. [11
USC �362(b)(2)(A)]
- Child support orders, including collection from wages and tax
refunds, and suspension of drivers licenses for failure to pay
support. [11
USC �362(b)(2)(C), (D), (E)]
- Tax audits, notices of tax deficiencies, demand for tax
returns, tax assessments and notices (although the actual
collection of tax is put on hold). [11
USC �362(b)(9)]
- Other actions not ordinarily effecting consumer bankruptcy
cases. See 11
USC �362(b) for more information.
A caution if you had a prior bankruptcy pending within the past year.
It is the automatic stay which stops or prevents creditors collection actions
(including repossession, garnishment, foreclosure, etc.). If you filed one
previous case which was pending within the past year, the stay will end on the
30th day after the filing of the present case. The stay will not go into
effect at all if you filed two or more previous bankruptcy cases which were
pending within the past year. To have the stay take effect longer where
there was a single previous case, or at all where there was more than one
previous case, you must file a motion with the court and demonstrate "that
the filing of the later case is in good faith as to the creditors to be
stayed." Prior cases which were dismissed under 11
USC �707(b) for abuse of the code and failure to meet the means test are
excluded in determining how long or whether the stay will take effect. [11
USC �362(c)(3) and 11
USC �362(c)(4)]
What if you had a prior bankruptcy within the last 8 years?
See Who is Eligible.
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