The automatic stay in bankruptcy is a key provision you need to understand fully. We know what the automatic stay does, and what it covers. But if you review the list of what is covered by the automatic stay, you’ll notice that the list is not all-encompassing.
That’s because not all actions are prevented. Filing for bankruptcy alone doesn’t help you if what you’re looking to stop isn’t covered.
So what actions are never covered by the automatic stay in bankruptcy?
There’s some push-and-pull about whether money problems are the most common cause of divorce and family strife. Though some say finances aren’t the top cause, I’m going out on a limb and say that a little digging will reveal it to be the truth.
Think about it – when you’ve got money problems, you’re more likely to lose sleep. You’re on edge. You’re preoccupied. Maybe you don’t fight about money quite so much, but it’s a good bet that you fight because of it all the time.
Maybe you split up before you file for bankruptcy. You life turns into what seems like a swarm of lawsuits and attorneys – paternity, custody, child support, maybe even domestic violence. As you head for the bankruptcy court doors, you think you’re home free.
The Automatic Stay May Not Help Much
Cool your heels for a moment and realize that the automatic stay isn’t going to make it all go away in a flash of light. Under Section 362(b)(2) of the U.S. Bankruptcy Code, the automatic stay doesn’t apply to the commencement or continuation of a civil action or proceeding for the establishment of paternity; for the establishment or modification of an order for domestic support obligations; concerning child custody or visitation; for the dissolution of a marriage, except to the extent that such proceeding seeks to determine the division of property that is property of the estate; or regarding domestic violence.
The automatic stay also doesn’t apply to the collection of a domestic support obligation from property that is not property of the estate. Nor does it cover actions with respect to the withholding of income that is property of the estate or property of the debtor for payment of a domestic support obligation under a judicial or administrative order or a statute.
If you’re past due on child support payments, it’s still going to be reported to the credit reporting agencies. And your tax refund can still be intercepted.
There’s A Good Reason For That
If your family life is disintegrating, who’s more important – you or the kids?
If it takes more than a split second to come up with the answer, you got it wrong.
The law understands that the family court may be unfair, but that’s your battle to take up in that court – not here in bankruptcy. The automatic stay exists to protect you from evil creditors and to help balance the interests of each creditor against one another, but it’s not there to shield you from your ex.
It Allows You To Focus Your Efforts
The lack of automatic stay protection when it comes to your family issues may at first seem unfair, but take a step back for a minute and think about it. By freeing you from the entanglement of the bankruptcy court, you’re free to continue waging your battles in family court where they’re better understood.
Your bankruptcy judge doesn’t have the full range of understanding of family law issues, so you’re going to get the right set of eyes dealing with your issues. And in the end, you’ll be able to get an informed and impartial decision with respect to those issues.
Sound fair?
Ever get behind on your apartment rent?
In many places, New York City included, falling behind on the rent just means you’re going to spend the next bunch of months in landlord-tenant court. If you’re interested in keeping the apartment then the landlord will eventually give you some sort of payment plan and you go on your merry way.
For some, however, the past due rent is to much to handle. The landlord-tenant judge issues a judgment of possession and you know there’s going to be a knock on the door any minute now.
Filing For Bankruptcy To Stop The Eviction
We’ve talked about the automatic stay already, and how it stops creditors from moving ahead with lawsuits and judgments. For tenants looking down the barrel of an eviction, however, the automatic stay may not provide solace.
According to Bankruptcy Code § 362(b)(22), the automatic stay does not apply as a bar to a Landlord’s efforts to evict you from your apartment if the state court judgment of possession was obtained before you file your bankruptcy case. So on that alone, you’re out of luck.
Pay Your Ticket And Take A Seat
Bankruptcy Code § 362(b)(22) does not, however, stand alone. Under § 362(l), you can keep the automatic stay in effect by depositing 30 days’ post-petition rent with the Clerk of the Court and by filing a certification required by § 362(l)(1). That certification must state that you’ll be able to cure the entire arrears, but if you’re filing a Chapter 13 bankruptcy you’re going to be paying those arrears through the Plan anyway.
Once you file your certification, the landlord can file an objection to challenge it. Then it comes down to the court’s decision on whether to allow the automatic stay can continue.
What If The Eviction Isn’t Based On A Money Default?
The ability to file a certification and pay a rent deposit with the court is for money defaults only. But there are many reasons why you may be evicted – for example, illegal drug use on the premises or maintaining unsafe conditions. In New York, for example, a debtor was evicted because the mess in the apartment created a hazardous situation (called a “Collyer Condition”).
In that case, the bankruptcy court held that
the judgment of possession issued by the Civil Court on January 5, 2007 rested upon the Collyer Conditions and past-due use and occupancy payments alike. However, the 2008 Order authorizing the landlord to execute the warrant did not indicate the presence of an outstanding monetary default. The Landlord argues, and the Debtor fails to dispute, that the 2008 Order was based solely upon the Debtor’s failure to cure the Collyer Conditions. Accordingly, Section 362(l) does not apply in this case.
In the end, as with anything else in bankruptcy the trick is to get into court in a timely manner. Filing for bankruptcy prior to the eviction warrant gives you a far wider ability to get the protection of the automatic stay than if you take care of matters afterwards. If you’re being dragged into landlord-tenant court, it’s a good idea to talk with a bankruptcy lawyer before things get too far out of hand.
Isn’t it amazing how kid’s games mirror the world in which we live as adults? Take, for example, the game of “red light, green light, 1-2-3.”
One child plays the role of the “stop light,” facing away from a line of other children. The stop light faces away says, “green light”. The other kids can move in until the stoplight says, “red light!” and turns around. If any of the others is still moving when the stop light turns around, they’re out.
Get everyone out and you win.
We leave behind the games when we go into the real world, but when you file for bankruptcy this particular bit of entertainment comes back in the form of the automatic stay.
Except that it’s not so much fun this time around.
Simply put, the automatic stay forces everyone to take the minute you file for bankruptcy. No more phone calls, no cards, no letters, no birthday cards, no lawsuits, no foreclosures. It’s as if the stop light has turned to red.
In this bankruptcy version of the game, there are a few key players. Each one of the types of actions that are stopped by the automatic stay plays a role, so you should know about them.
There are limits to how and when the stay is enforced, just as there are rules in any game. And perhaps it’s a bit cheeky to liken this as a game at all, but there’s something to it, I think: your creditors have rights and responsibilities, and so do you.
When you’re neck-deep in debt and trying to figure out which end is up, there’s something about being able to rely on your childhood memories to make sense of it all. And once you fit it into your world view it’s a lot easier to get through it and see out the other end.
