Will a Bankruptcy Filing Stop All Legal Action against You?

Some Legal Matters Are Not Affected by the Automatic Stay

When you file a bankruptcy petition, seeking to discharge debts under Chapter 7 or reorganize your obligations under Chapter 13, an automatic stay immediately goes into effect. One of the effects of the automatic stay is the suspension of legal actions against you. But there are limits to the scope of the automatic stay.

The Automatic Stay Has No Impact on Criminal Prosecutions

As a general rule, if you have incurred debt through an illegal activity—embezzlement, theft or destruction of property—filing any type of bankruptcy petition won’t have any effect on the criminal proceedings against you. There are two exceptions—debts arising from overpaid government benefits, such as Social Security; and debts incurred because you damaged government property. In those situations, you can suspend criminal prosecutions to recover those amounts.

The Automatic Stay Does Not Suspend Most Family Law Proceedings

You can’t discharge or restructure child support or spousal support through a bankruptcy proceeding. Filing for bankruptcy protection won’t suspend your obligation to make court ordered payments for support. You can, though, use a Chapter 13 filing to negotiate a new property settlement.

The Automatic Stay Can Be Lifted at the Discretion of the Court

It’s also important to understand that, even though the automatic stay may go into effect, the court has the authority to remove the stay, either on its own initiative or pursuant to a request from a creditor. Some specific situations where that might happen include:

• The court determines that you are misrepresenting your income or resources
• The automatic stay has suspended foreclosure proceedings, but the lender has shown the potential for substantial losses if the stay is not lifted
• Your landlord has instituted eviction proceedings that were suspended by the automatic stay and fears damage to the property or significant losses if the eviction order is not entered and enforced

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.