How Does the Automatic Stay Work in a Nevada Chapter 7 Bankruptcy?

If you are in debt to the point where your creditors are threatening legal action, or have already sued you, filing for Chapter 7 bankruptcy can provide you immediate relief in the form of an automatic stay. This is a key part of the bankruptcy process that helps protect you from ongoing creditor harassment while your case proceeds through the court.

What Is the Automatic Stay?

The automatic stay is a critical part of the Bankruptcy Code. Essentially, once a debtor files a petition for Chapter 7 bankruptcy, the act of filing that petition immediately “operates as a stay” applicable to most legal actions that a creditor has or may file against the debtor. A stay means that collection efforts and legal action are suspended while the bankruptcy case is pending.

What Does the Automatic Stay Do?

The automatic stay tells all creditors to immediately “STOP” any actions in connection with collecting or enforcing their debts. Here are a few practical examples:

• If the debtor is behind in their mortgage payments, the lender cannot initiate foreclosure proceedings.
• A debt collector cannot call or otherwise contact the debtor in an attempt to collect any money owed.
• Any civil lawsuits pending against the debtor are temporarily suspended.
• Any wage garnishments of the debtor’s pay are temporarily suspended.

There are a few types of acts that are not subject to an automatic stay. For instance, the IRS can still audit you and demand payment of certain unpaid taxes, but the IRS cannot issue a tax lien or seize any of your property while the automatic stay remains in effect. An automatic stay also generally will not stop or suspend any criminal, child support, or alimony proceedings involving the debtor.

How Long Does the Automatic Stay Last?

In a Chapter 7 bankruptcy case, the automatic stay lasts until a debtor’s case is complete and the Bankruptcy Court issues a discharge. However, individual creditors may file motions for “relief” from the automatic stay. If stay relief is granted, creditors can resume their collection activities even before the bankruptcy case is finished. For example, a landlord might seek relief from the automatic stay to proceed with the eviction of a debtor-tenant for unpaid rent.

What Happens If a Creditor Violates the Automatic Stay?

If a creditor willfully violates the automatic stay, the debtor can take legal action in the Bankruptcy Court and seek damages. This is often done by filing a motion to hold the creditor in contempt. If successful, the court can order the creditor to pay actual damages, legal fees, and even punitive damages to the debtor.

Contact a Las Vegas Bankruptcy Attorney at Larson & Zirzow Today

The automatic stay is just one way that bankruptcy can help protect you and your family. Our Nevada Chapter 7 bankruptcy lawyers for individuals can advise you on this and other aspects of the bankruptcy process that can help protect people and their property. Contact Larson & Zirzow today at 702-382-1170 to schedule a complimentary consultation.