Category: Procedure

The Automatic Stay what is it? Why is it important in Bankruptcy Practice?

What is the Automatic Stay?

When a bankruptcy is filed, in most cases, an automatic court order goes into effect that prevent most creditors from collecting against debts. This automatic court order is known as the automatic stay. In the bankruptcy code it is found at 11 USC 362.

In general most types of collections are stayed when a bankruptcy is filed. This would include even debts that might not ultimately be discharged. For example, many taxes are not discharged but the taxing agency may not collect during the discharge.

How long does the Automatic Stay last?

The automatic stay remains in effect until either the bankruptcy is discharged or dismissed. There are exceptions to this. A secured creditor may request that the stay be lifted in order to collect on a debt in which they lack “adequate protection”. Another exception is if there are prior bankruptcies that were dismissed within the past 12 months. If there is one prior dismissal then the stay only lasts 30 days unless there is a motion to extend it. If there are two or more bankruptcies then the debtor must requests that a stay be granted.

Are there exceptions to the Automatic Stay?

Yes, Child support is specifically excepted from the automatic stay. Furthermore a state court may evict a tenant despite the stay when the evicting court has already issued an order for the eviction. Since Bankruptcy only deals with civil debts, a criminal court is under no obligation to stay their proceedings. There are additional exceptions that are found in the bankruptcy code.

What about Garnishments and Utility Shutoffs?

Even if there is a garnishment that is proceeding the garnishment is stayed upon the filing of the bankruptcy. Any monies that were collected after the filing of the case will be returned to the client. Furthermore if there is a utility shutoff, upon the filing of the case the utilities should be restore. However, if the debtor acted fraudulently in obtaining the utility (such as reopening the gas line illegally after it is shutoff) the utility is under no obligation to set it up again.

Phone Calls?

The automatic stay prevents a creditor from calling you to collect a debt. I find that companies take this rule very seriously and will stop all correspondence including regular statements, whether or not you want them to send the correspondence.

What if a creditor violates the automatic stay?

If the creditor had no knowledge of the automatic stay then they may be responsible for recouping certain type of damages (example would be returning a garnishment), but they would not be liable for attorney fees. If on the other-hand the company willfully violated the order, then the company would be liable for attorney fees that were expended by the debtor in enforcing the order. The bankruptcy judge upon the filing of a motion would make that determination.

341 Hearing – Meeting of the Creditors Chapter 7

What are the basics

Typically a debtor need attend only one hearing which is different than other forms of litigation. The hearing is typically held one month after filing, but, depending on case load, may be held later than that.

Location

The location of the hearing depends on which county you live in. For Lake, Cuyahoga, Lorain, and Geauga counties, you are assigned to Cleveland. If you live in Summit, Portage, or Medina Counties you are assigned to Akron. The meeting locations is not always the courthouse. In Akron, the hearings are held in a shopping mall. Cleveland, Youngstown and Canton are held in their Courts. Ashtabula County (which is part of Youngstown’s court system) meetings in Jefferson. It is therefore important that you keep your hearing notice. Here are the meeting locations in our trustee region.

The Reason for the 341 Hearing

You do not see a judge at a 341 hearing (if all goes well you will never meet the judge). Instead you meet someone who is know as the trustee. He or she is the closest person to an opposing counsel you will meet in the bankruptcy system. The job of a Trustee is to determine if there is anything that he or she can take from your, sell it, and deliver the proceeds to the creditors. This examination is being done to determine if there is anything that they can take.

While the above paragraph may sound a little frightening, most of the trustees are actually nice and all that I have come across are fair. Furthermore, the trustees as well as ourselves must follow the law. That law is pretty clear what a trustee may or may not take so there is likely to be no surprises.

What You Need to Bring

The rules of bankruptcy procedure require that your bring three items to your bankruptcy hearing.

  • A government issued id (drivers license or state id)
  • A government issued document with your social security number on it (social security card, social security statement, 1099, w2 But not your tax return or your bankruptcy notice
  • Your most recent bank statement
  • Most recent paystub

Furthermore the Bankruptcy Code requires under 11 USC 521(e)(2) that I provide the trustee with a copy of your most recent tax return 7 days prior to your hearing. If that does not happen the court can dismiss the case.

What to Wear and Kids

I would suggest business casual for the hearing. Pants and a collared shirt is adequate. It is not a good idea to bring your kids to this hearing, but if there is no alternative make sure that they behave during the hearing.

How Long

The hearing itself should last about 5-10 minutes. However keep in mind that they may not call you right away. The questions that will be asked are similar to the questions that I asked at the signing consultation, except where most of the time at a signing is focused on the debts, this hearing will be focused on property.

What Happens Next

After the hearing, the trustee may ask for additional documents, require you to come to an additional hearing, or conclude and end the hearing.

At a later date I will go into greater detail about this hearing.

341 Hearing – Meeting of the Creditors Chapter 7

What are the basics

Typically a debtor need attend only one hearing which is different than other forms of litigation. The hearing is typically held one month after filing, but, depending on case load, may be held later than that.

Location

The location of the hearing depends on which county you live in. For Lake, Cuyahoga, Lorain, and Geauga counties, you are assigned to Cleveland. If you live in Summit, Portage, or Medina Counties you are assigned to Akron. The meeting locations is not always the courthouse. In Akron, the hearings are held in a shopping mall. Cleveland, Youngstown and Canton are held in their Courts. Ashtabula County (which is part of Youngstown’s court system) meetings in Jefferson. It is therefore important that you keep your hearing notice. Here are the meeting locations in our trustee region.

The Reason for the 341 Hearing

You do not see a judge at a 341 hearing (if all goes well you will never meet the judge). Instead you meet someone who is know as the trustee. He or she is the closest person to an opposing counsel you will meet in the bankruptcy system. The job of a Trustee is to determine if there is anything that he or she can take from your, sell it, and deliver the proceeds to the creditors. This examination is being done to determine if there is anything that they can take.

While the above paragraph may sound a little frightening, most of the trustees are actually nice and all that I have come across are fair. Furthermore, the trustees as well as ourselves must follow the law. That law is pretty clear what a trustee may or may not take so there is likely to be no surprises.

What You Need to Bring

The rules of bankruptcy procedure require that your bring three items to your bankruptcy hearing.

  • A government issued id (drivers license or state id)
  • A government issued document with your social security number on it (social security card, social security statement, 1099, w2 But not your tax return or your bankruptcy notice
  • Your most recent bank statement
  • Most recent paystub

Furthermore the Bankruptcy Code requires under 11 USC 521(e)(2) that I provide the trustee with a copy of your most recent tax return 7 days prior to your hearing. If that does not happen the court can dismiss the case.

What to Wear and Kids

I would suggest business casual for the hearing. Pants and a collared shirt is adequate. It is not a good idea to bring your kids to this hearing, but if there is no alternative make sure that they behave during the hearing.

How Long

The hearing itself should last about 5-10 minutes. However keep in mind that they may not call you right away. The questions that will be asked are similar to the questions that I asked at the signing consultation, except where most of the time at a signing is focused on the debts, this hearing will be focused on property.

What Happens Next

After the hearing, the trustee may ask for additional documents, require you to come to an additional hearing, or conclude and end the hearing.

At a later date I will go into greater detail about this hearing.