Personal Bankruptcy Filings—When the Automatic Stay Doesn’t Apply

Legal Proceedings That Are Not Suspended by Bankruptcy Filing

One of the most attractive features of American bankruptcy law is the automatic stay, which goes into effect immediately upon filing your petition. The stay temporarily suspends all legal proceedings to collect debt and prevents your creditors from harassing you with collection calls or letters. The stay does not, however, apply to all legal proceedings, even some related to your finances.

The Automatic Stay Won’t Affect Criminal Prosecutions

As a general rule, a criminal prosecution is not an effort to collect a debt but is instead designed to determine guilt and impose penalties for the violation of criminal law. Accordingly, even if the prosecution involves a financial crime, such as embezzlement or theft, it won’t be stayed by a bankruptcy filing. There are a couple exceptions, though. If a prosecutor is seeking to recover the value of damaged government property or the over payment of government benefits, the automatic stay will apply to suspend proceedings.

The Stay Doesn’t Prevent Collection Efforts Related to Most Family Law Obligations

You can’t use bankruptcy to reorganize or discharge child support or alimony obligations. That means you can’t use the automatic stay to stop making support payments. Government officials can still engage in collection efforts related to child or spousal support.

The Court May Lift the Automatic Stay in Some Real Estate Matters

bankruptcy courts have discretion to lift the stay as it applies to certain real estate proceedings:

• Foreclosure actions where the lender is at significant risk of losing a lot of money if the foreclosure cannot be completed; and
• Landlord-tenant matters where an eviction proceeding was properly instituted before the bankruptcy filing but the order was not yet issued. The court may lift the stay to allow entry of the eviction order.

Contact Attorney Howard N. Sobel

At the office of Howard N. Sobel, we work closely with people in New Jersey in personal bankruptcy filings. Contact our office online or call us at 856-424-6400 to set up a free initial consultation (on selected cases). We are currently available by phone, text message, or videoconference only. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.

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