Understanding the Automatic Stay in Bankruptcy in Texas

 Posted on March 14, 2024 in Automatic Stay

Filing for bankruptcy provides immediate relief through the automatic stay provision. However, this powerful tool has certain limitations that you should understand. A Texas lawyer can explain the automatic stay, what it covers, and where its protections end.

What is the Automatic Stay?

The automatic stay is one of the core protections triggered as soon as a bankruptcy case commences. It serves as an automatic injunction, prohibiting most creditors from taking any further collection actions against you or your property.

The stay automatically arises by federal law operation upon filing a bankruptcy petition. It applies to all bankruptcy chapters—Chapters 7, 11, 12, and 13. No court order is required.

The Primary Benefits of the Stay

The automatic stay delivers crucial breathing room by stopping creditor harassment and providing the debtor with a temporary reprieve from collection efforts. Specifically, it stops:

• Foreclosure proceedings against the debtor’s home or other property.
• Wage garnishments.
• Repossession of vehicles or other collateral.
• Collection calls and letters demanding payment.
• Lawsuits and other court proceedings against the debtor.

This injunctive relief allows the debtor to focus on reorganizing finances, negotiating with creditors, or preparing for an orderly liquidation of assets without harassment.

Limitations on the Automatic Stay

While powerful, the automatic stay is not boundless. Several key exceptions and limitations exist under Texas law and the U.S. Bankruptcy Code:

• Criminal proceedings not impacted: The stay does not impair or halt criminal proceedings or actions by governmental units to enforce police or regulatory powers. So, criminal prosecutions may proceed unaffected.

• Support obligations still enforceable: Obligations for alimony, child support, or other domestic support orders are generally excluded from the stay’s protections. Certain proceedings to establish or modify these payments may continue.

• Limitations on repeat filers: If a debtor had a previous bankruptcy dismissed in the prior year, the automatic stay may be limited to 30 days or terminated entirely unless extended by the court.

• Landlord and lessor rights: Landlords and lessors may still initiate eviction proceedings, though obtaining actual possession may require court approval, depending on the lease termination date.

• Stay termination or modification: Even when the automatic stay applies initially, creditors can request the court to terminate, annul, modify, or conditionally lift the stay for cause under certain circumstances.

Be Proactive to Maximize Protections

The automatic stay provides robust but not unlimited protections. Understanding its boundaries allows Texas debtors to be proactive in maximizing its benefits and addressing any potential issues from the outset of their bankruptcy case.

Contact a Boerne, TX Bankruptcy Lawyer

Consulting a San Antonio, TX bankruptcy attorney can help you leverage the automatic stay’s power while navigating its nuances compliantly and strategically. Call Law Offices of Chance M. McGhee at 210-342-3400 for a free consultation with a lawyer with over 20 years of experience.