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Understanding how the automatic stay works in bankruptcy

Many people in Central Florida think of bankruptcy as a dark, twisted road with an unknown outcome. While the end of a bankruptcy case cannot always be accurately predicted, virtually every personal bankruptcy case begins with the same event: the issuance of a court order called the "automatic stay." The automatic stay provides the debtor with immediate protection from collection actions by creditors while the evaluation of the debtor's assets proceeds.

Whenever a petition for bankruptcy petition is filed under Chapter 7, Chapter 11 or Chapter 13, the court where the petition is filed automatically issues an order that tells every creditor of the debtor to stop any and all collection actions against the debtor or the property held in the bankruptcy estate. The automatic stay affects actions to obtain possession of property from the debtor, to create, perfect or enforce any lien against property of the debtor, or to collect, assess or recovery a claim against the debtor that arose before the petition was filed.

The automatic stay has certain limitations. It does not affect any proceeding for the establishment of paternity against the debtor, for establishment or modification of an order for domestic support obligations or concerning child custody or visitation. Virtually every judicial action that may be pursued against the debtor for family support matters is halted. The stay does not have any effect on actions to assess or collect a tax assessment. The bankruptcy code also provides other exceptions to the reach of the automatic stay that apply only in special situations. The stay remains in force until the bankruptcy proceeding is concluded and all claims against the property of the estate have been resolved.

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Diaz Family Law Firm
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