Bankruptcy facts

Upon the filing of a bankruptcy under any chapter, including but not limited to Chapters 7, 13, and 11, something called the "automatic stay" kicks in when you file and automatically halts the progress of all attempts to collect all debts, including existing lawsuits, repossessing your car, and garnishing your wages. If the creditor keeps hounding you after filing, you may take legal action. If found in contempt of court, they may have to pay you money damages.


The “automatic stay” is a rule that prevents any creditor from doing anything at all to enforce a claim against a debtor during the bankruptcy case. The granting of the stay depends on how many bankruptcies you have filed within 1 year.

Some examples of actions by a creditor that would violate the stay are these:

(1) Filing a new lawsuit, or continuing to press a lawsuit that had already been filed.

(2) Sending dunning letters or making phone calls in an attempt to collect a debt.

(3) Filing a “financing statement” to perfect a security interest.

(4) Refusing to issue a transcript of your schooling.

(5) Canceling your driver’s license.

Exceptions: Criminal prosecution, paternity proceedings, litigation to collect child support or alimony, repaying a loan from certain types of pensions, and IRS audits are not stopped. With residential real estate leases, landlords seeking to evict tenants are free to complete evictions if the landlord already has a judgment of possession or where the eviction is based on endangerment or use of illegal substances on the leased premises. Moreover, the automatic stay doesn't stop or postpone actions to suspend driver's licenses and revoke professional licenses.


utility company may not shut off service solely because you file bankruptcy or because you owe them money at the time you file. However, if you don’t give them an adequate deposit or other assurance of payment within 20 days after filing, the Bankruptcy Code allows them to shut off service. State utility regulations frequently have provisions that restrict utility shutoffs, however. For example, your state may not allow an energy company to shut off service during the winter months if that would deprive you of heat. Also for example, your state may not allow certain kinds of utility to demand a deposit from anyone.
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Filing for bankruptcy protection does not allow your ex to discharge past due child support obligations. Any back payments owed for child support cannot be discharged in a bankruptcy proceeding. The automatic stay does not apply to child support collection efforts.

Under the post-October 17, 2005 rules, domestic support obligations are top priority in a Chapter 7 "asset case", where there are funds to pay creditors. The debtor should file a proof of claim to have most of his or her liquidated estate used to pay off the child support obligation.

In a Chapter 13 case, your back child support payments will be paid through your Chapter 13 plan, in addition to the regular payments due after the petition date. These support obligations must be current in order to have your Chapter 13 plan confirmed. Moreover, to obtain a discharge in a Chapter 13 case, the debtor will have to certify that all post-petition child support obligations have been met.

To put it another way, your ex's bankruptcy case shouldn't have any long-term effect on child support payments - and may even make it easier for him/her to make them, because he/she won't have as much other debt - but will complicate enforcement in the short term. Practically speaking, you will need an attorney's help.

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Filing a Chapter 7 case only temporarily sidetracks a lender's right to foreclose until it gets permission to go forward with the foreclosure proceedings by requesting and receiving "relief from the automatic stay" from the court. That relief is likely to be granted unless you can immediately bring your account up to date, demonstrate a likelihood and that you'll continue to make payments when due, and show that your equity in the home provides a sufficient "cushion" for the lender. In some bankruptcy districts, you must also negotiate a formal "reaffirmation agreement" with the lender.

A Chapter 7 never permanently stops a foreclosure, unless the creditor agrees and homestead (exemption) laws stop the trustee from selling the property.

Most people who file for bankruptcy have big back payments due on their mortgage that they can't pay off right away. The solution to that problem that allows them to keep their home is to file under Chapter 13 bankruptcy. The Chapter 13 plan provides for continuing monthly payments on the mortgage and paying off the amount in back payments over the life of the plan (three to five years).

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