Stay

Stay: A suspension or postponement of judicial proceedings.

Stay: A ruling by the court in civil and criminal proceedings that halts further legal action in a trial or legal proceeding.

An Automatic Stay Will Halt Foreclosure Proceedings

A stay, a ruling by a court to halt or suspend a legal proceeding temporarily or indefinitely, is common in foreclosure cases.

As an example, an automatic stay, a statutory protection for homeowners, is generally available in Chapter 7 and Chapter 13 bankruptcy claims. The stay is automatically issued when the homeowner files for bankruptcy and forbids creditors from collecting debts, enforcing liens, or foreclosing on the homeowner’s property.

“Though an automatic stay does not discharge the homeowner’s debt, it does stop collection efforts by creditors while the bankruptcy case is being resolved. Therefore, an automatic stay will interrupt any foreclosure that the homeowner is facing when they file for bankruptcy.

“Simply by filing a Bankruptcy Case, you can stop most of your creditors from initiating or continuing lawsuits, sending harassing collection letters, or making annoying collection calls. The automatic stay stops most creditors from garnishing your wages, from recording judgment liens against your property, from repossessing property that you own, and trying to foreclose a mortgage against real estate that you own, while you are under the protection of the Bankruptcy Court,” Alabama attorney David W. Cybak says.

According to the American Bankruptcy Institute, “Section 362(a) of the Bankruptcy Code contains a long list of actions that are stayed by the filing of a bankruptcy petition. For example, after a debtor files for bankruptcy, a creditor cannot file or continue to litigate a lawsuit against the debtor to recover on claims that arose before the petition date. If a lawsuit has been filed against the debtor prior to the petition date, that lawsuit, at least as it relates to the debtor, must immediately halt.

“The automatic stay precludes creditors from enforcing pre-petition judgments against the debtor, perfecting or enforcing liens granted pre-petition, foreclosing on collateral, terminating contracts on account of pre-petition defaults, or taking any number of other actions against the debtor or its property.

“The stay halts rights of setoff as well. Thus, if a creditor and the debtor owe each other mutual pre-petition debts arising from different transactions, the creditor cannot, without relief from the stay, apply the debt owing to it against the debt it owes. However, if the debtor’s obligation to the creditor and the creditor’s obligation to the debtor both arise from the same transaction, the creditor may have a right of recoupment. Courts hold that the right of recoupment is not subject to the automatic stay.”

There are exceptions to the automatic stay rule though.

Courts have decided that when a government agency seeks to enforce its regulatory authority, such as protecting the public health, safety or welfare, they are exempt from the automatic stay.

Other exceptions include state decisions regarding the licensing of educational institutions, certain ship and vessel mortgage foreclosures by the Secretary of Commerce or the Secretary of Transportation, and certain HUD mortgage foreclosures on multi-unit properties.

In the end, if a bankruptcy case is successful and a discharge order is entered, the automatic stay will become a permanent injunction, meaning the creditor is permanently barred from collecting any debts that have been discharged.

Stay

Stay: A suspension or postponement of judicial proceedings.

Stay: A ruling by the court in civil and criminal proceedings that halts further legal action in a trial or legal proceeding.

An Automatic Stay Will Halt Foreclosure Proceedings

A stay, a ruling by a court to halt or suspend a legal proceeding temporarily or indefinitely, is common in foreclosure cases.

As an example, an automatic stay, a statutory protection for homeowners, is generally available in Chapter 7 and Chapter 13 bankruptcy claims. The stay is automatically issued when the homeowner files for bankruptcy and forbids creditors from collecting debts, enforcing liens, or foreclosing on the homeowner’s property.

“Though an automatic stay does not discharge the homeowner’s debt, it does stop collection efforts by creditors while the bankruptcy case is being resolved. Therefore, an automatic stay will interrupt any foreclosure that the homeowner is facing when they file for bankruptcy.

“Simply by filing a Bankruptcy Case, you can stop most of your creditors from initiating or continuing lawsuits, sending harassing collection letters, or making annoying collection calls. The automatic stay stops most creditors from garnishing your wages, from recording judgment liens against your property, from repossessing property that you own, and trying to foreclose a mortgage against real estate that you own, while you are under the protection of the Bankruptcy Court,” Alabama attorney David W. Cybak says.

According to the American Bankruptcy Institute, “Section 362(a) of the Bankruptcy Code contains a long list of actions that are stayed by the filing of a bankruptcy petition. For example, after a debtor files for bankruptcy, a creditor cannot file or continue to litigate a lawsuit against the debtor to recover on claims that arose before the petition date. If a lawsuit has been filed against the debtor prior to the petition date, that lawsuit, at least as it relates to the debtor, must immediately halt.

“The automatic stay precludes creditors from enforcing pre-petition judgments against the debtor, perfecting or enforcing liens granted pre-petition, foreclosing on collateral, terminating contracts on account of pre-petition defaults, or taking any number of other actions against the debtor or its property.

“The stay halts rights of setoff as well. Thus, if a creditor and the debtor owe each other mutual pre-petition debts arising from different transactions, the creditor cannot, without relief from the stay, apply the debt owing to it against the debt it owes. However, if the debtor’s obligation to the creditor and the creditor’s obligation to the debtor both arise from the same transaction, the creditor may have a right of recoupment. Courts hold that the right of recoupment is not subject to the automatic stay.”

There are exceptions to the automatic stay rule though.

Courts have decided that when a government agency seeks to enforce its regulatory authority, such as protecting the public health, safety or welfare, they are exempt from the automatic stay.

Other exceptions include state decisions regarding the licensing of educational institutions, certain ship and vessel mortgage foreclosures by the Secretary of Commerce or the Secretary of Transportation, and certain HUD mortgage foreclosures on multi-unit properties.

In the end, if a bankruptcy case is successful and a discharge order is entered, the automatic stay will become a permanent injunction, meaning the creditor is permanently barred from collecting any debts that have been discharged.

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