Bankruptcy Protection: The Automatic Stay

Detroit Chapter 7 and Chapter 13 Consumer Bankruptcy Filings

 I, Walter Metzen, will provide, free of charge as part of your free initial Bankruptcy Analysis, a means test calculation to determine if you are eligible for Chapter 7 Bankruptcy.  Nearly 90% of the people who walk through my door are eligible to file a Chapter 7 Bankruptcy in Michigan and get a permanent discharge of their debt. With Chapter 13 Bankruptcy in Michigan, we can develop and affordable repayment plan to fit every budget.
 

 Contact me, Michigan bankruptcy attorney Walter Metzen to learn more about how I can help you get a Fresh Financial Start!.

WHAT IS THE AUTOMATIC STAY IN BANKRUPTCY?

The automatic stay provides a period of timein which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. As with cases under other chapters of the Bankruptcy Code, a stay of creditor actions against the chapter 11 debtor automatically goes into effect when the bankruptcy petition is filed. 11 U.S.C. 362(a). The filing of a petition, however, does not operate as a stay for certain types of actions listed under 11 U.S.C. 362(b). The stay provides a breathing spell for the debtor, during which negotiations can take place to try to resolve the difficulties in the debtor’s financial situation. Under specific circumstances, the secured creditor can obtain an order from the court granting relief from the automatic stay. For example, when the debtor has no equity in the property and the property is not necessary for an effective reorganization, the secured creditor can seek an order of the court lifting the stay to permit the creditor to foreclose on the property, sell it, and apply the proceeds to the debt. 11 U.S.C. 362(d).

CHANGES TO THE AUTOMATIC STAY UNDER THE NEW BANKRUPTCY LAW

S. 256 302; serial filings
A new 362(c)(3) provides that if a
Chapter 7 , 11, or Chapter 13 case is filed within one year of the dismissal of an earlier case (other than a Chapter 11 or 13 case filed after a 707(b) dismissal), the automatic stay in the second case terminates 30 days after the filing, unless a party in interest demonstrates that the second case was filed in good faith with respect to the creditor sought to be stayed. And if a second repeat filing takes place within the one-year period, the automatic stay will not go into effect (and the court is required promptly to enter an order confirming the inapplicability of the stay on request of a party in interest). However, a party in interest may obtain imposition of the stay by demonstrating that the third filing is in good faith with respect to the creditor sought to be stayed. For both second and third filings within one year, circumstances are described which generate a presumption that the new filing was not made in good faith, and such a presumption would be required to be rebutted by clear and convincing evidence.

Under a new 362(i), this presumption would not arise in “any subsequent case” if a debtor’s case is dismissed “due to the creation of a debt repayment plan.”

• S. 256 303; in rem relief; ineligible debtors “In rem” relief from the automatic stay is authorized by a new 362(d)(4). In cases involving either (A) transfers of real property collateral without the consent of the secured creditor or court approval or (B) multiple bankruptcy filings involving the same real property, the court may issue an order of relief from the automatic stay, which order, properly recorded, is binding on all owners of the property for two years from the date of entry. A party in interest may file a request for imposition of the stay within 30 days of a subsequent case filing, and the court may impose the stay only if the party demonstrates that the case was filed in good faith as to the creditors sought to be stayed. Where in rem relief is effective, new 362(b)(20) creates an exception to the automatic stay for lien enforcement activity in later cases.

A new 362(b)(21) excepts from the stay any act to enforce a lien or security interest in real property if the debtor was ineligible under 109(g) or filed the case in violation of an order “prohibiting the debtor from being a debtor” in another case under Title 11.

• S. 256 311; exception for leased residential real estate Two new exceptions from the automatic stay are established for landlords seeking to evict tenants. The first, 362(b)(22), allows the continuance of any eviction proceeding in which the landlord obtained a judgment of possession prior to the filing of the bankruptcy petition. The second, 362(b)(23), deals with evictions based on “endangerment” of the rented property or “illegal use of controlled substances” on the property. Paragraph (b)(23) excepts the eviction proceeding from the stay if (a) it was commenced before the filing of the bankruptcy case, or (b) if the endangerment or illegal use occurred within the 30 days before the bankruptcy filing. In either situation, the landlord would be required to file with the court and serve on the debtor a certificate setting out the facts giving rise to the exception.

New provisions in 362(l)-(m) allow a debtor to contest the applicability of both of these new exceptions by filing timely certifications under penalty of perjury. As to the (b)(22) lease exception, the debtor would be able under 362(l) both to keep the stay in effect for an initial 30 days after the bankruptcy filing—by certifying that applicable non-bankruptcy law allowed the lease to remain in effect upon the debtor’s cure of the default that was the basis of the eviction order—and to keep the stay in effect after 30 days by filing a further certification that the cure amount had been paid within the initial 30 days. As to (b)(23), a new 362(m) provides that if the debtor files a certificate denying the assertions in the landlord’s certificate, the court is required to conduct a hearing within 10 days “to determine if the situation giving rise to the lessor’s certification . . . existed or has been remedied.”

• S. 256 315(a); notice to creditors Section 342(c) is amended to remove the provision that a failure by the debtor to supply notice to creditors in the prescribed form does not invalidate the notice. Instead, a new 342(g) provides that no monetary penalty may be imposed on a creditor for violating the automatic stay or for failing to turn over property, unless notice is given in a form effective under amended 342. As amended by new provisions in (c)(2), (e), and (f), 342 now provides that notice to a creditor will not be effective unless it is served at an address filed by the creditor with the court or at an address stated in two communications from the creditor to the debtor within 90 days of the filing of the bankruptcy case (or between 90 and 180 days if the creditor was prohibited from communicating with the debtor during the more recent 90-day period). To be effective, the notice must also include the account number used by the creditor in the two relevant communications. An otherwise ineffective notice will only subject the creditor to liability if the notice was “brought to the attention of the creditor,” which is defined as receipt by a person designated by the creditor to receive bankruptcy notices.

 

 Contact me, bankruptcy attorney Walter Metzen to learn more about how I can help you get a Fresh Financial Start!.

 Be sure to Obtain a copy of your Credit Report after your Michigan Bankruptcy Filing and check it for Mistakes.

Contact me, bankruptcy attorney Walter Metzen to learn more about how the new Chapter 7 bankruptcy law may affect your case. I offer a free initial consultation so we can discuss your case personally.

We are a Debt Relief Agency helping people file for bankruptcy relief under the Bankruptcy Code. Let us help you decide if bankruptcy is right for you.

Bankruptcy attorney Walter Metzen represents clients throughout Southeast Michigan, including the communities of Detroit, Southfield, Warren, Roseville, Farmington Hills, Ann Arbor, Belleville, Canton, Clinton Township, Dearborn, Dearborn Heights, Hamtramck, Highland Park, Holland, Howell, Lincoln Park, Livonia, Macomb, Northville, Plymouth, Port Huron, Redford, Rochester, Saginaw, Southfield, Sterling Heights, Taylor, Trenton, Troy, Westland, Wyandotte, Ypsilanti, Mount Clemens, Howell, Oakland County, Macomb County, Wayne County, Washtenaw County, Livingston County, and all of the surrounding areas.
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We are a Federally Designated Debt Relief Agency and Bankruptcy Lawyers who help people file for bankruptcy relief under the Bankruptcy Code.  We do not retain clients on the strength of advertising material alone but only after following our own engagement procedures based on in-person interviews, conflict checks, and retainer agreements. The information contained on this site is intended to educate members of the public generally and is not intended to provide solutions to individual problems. Nor does the use or reliance of information contained on this web site constitute the establishment of a lawyer-client relationship. Readers are cautioned not to attempt to solve individual problems on the basis of information contained herein and are strongly advised to seek competent legal counsel before relying on information on this site.


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