Exceptions to the Automatic Stay

There are so many new terms for you to learn if you want to understand the in’s and out’s of bankruptcy. So what’s the “automatic stay?” This means that creditors have to stop trying to collect the debts that you owe as soon as you file bankruptcy. However, there are some special exceptions to this rule. We will spend this blog discussing exceptions to the automatic stay.

Why File Bankruptcy?

The automatic stay is one of the benefits of filing bankruptcy (probably the most important). They call it “automatic” because as soon as you file bankruptcy, it automatically applies to you. You don’t need to go to bankruptcy court or have anyone approve it for it to go into action. It is intended to stop any collections.

Because this is one of the advantages of filing bankruptcy, it’s important to understand the exceptions to this rule where creditors can still try to collect money from you even if you have filed bankruptcy.

The Exceptions in Automatic Stay

1. Criminal Matters
2. Collection of Child or Spousal Support
3. Taxes
4. Family Court


1. Criminal Matters and Bankruptcy

Regardless of your filing for bankruptcy, if a prosecutor/district attorney or other government authority begins a case against you, the case can still proceed.

You can be:
• Indicted
• Tried
• Sentenced
• Incarcerated
And the case will still proceed.

This doesn’t just apply to misdemeanors and felonies. Every state is different and some even take traffic infractions into account when evaluating “criminal matters.” Sometimes the line isn’t exactly clear when it comes to the differences between criminal and civil debts.
For example, the following could involve criminal charges, civil claims or both:
• An employee’s embezzlement
• Vehicle repair shop’s illegal disposal of waste
• A bar fight

If you have anything unusual on your record such as the previous examples, make sure you let your bankruptcy attorney know.

2. Collection of Child or Spousal Support

The support that you are currently paying can continue to be ongoing to the payee, either directly or through enforcement agencies, regardless of filing for bankruptcy.
Even if you file Chapter 7 bankruptcy, unpaid support arrearage can still start or continue:
• Through wage withholding
• Suspension of your driver’s license
o Regular AND occupational
• Suspension of all other government issued licenses including:
o Occupational licenses
o Professional licenses
o Hunting licenses
o Other recreational licenses
• Seizure of tax refunds
• Garnishment of bank accounts
However, filing for Chapter 13 CAN stop these methods from collecting unpaid support. The debtor MUST follow a number of steps.

The most important ones:

• Start making the regular support payments right away
• Arrange to pay the arrearage in full through the Chapter 13 plan
• Pay as proposed


3. Your Taxes & Bankruptcy

When it comes to taxing authorities, they can

• Start or finish tax audits
• Send you a notice that you owe taxes
• Assess your taxes and send a demand that you pay them
o But not anything else
• Demand that you file your tax returns
• Even file a tax lien (in limited situations)


4. Family Court

If you are about to be divorced or have been for some time now, your ex-spouse can start certain proceedings in order to stop your automatic stay.
They are as follows:
• Figure out paternity of your child
• Change or decide the amount of spousal or child support to pay
• Settle child custody and/or visitation issues
• Address domestic violence disputes
• Disperse a marriage
o However, spouses cannot include a determination about how assets or debts will be divided between them

When it comes to the automatic stay, almost all creditors stop almost all actions. However, to reiterate, if you are involved in any court proceedings or collection efforts, you need to let your bankruptcy attorney know right away so that you can be prepared for the next actions.

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