As soon as you file for bankruptcy, the "automatic stay" goes into effect. An automatic stay is provided for in section 362(a) of the Bankruptcy Code. The purpose of this court order is to give the debtor "a breathing spell from his creditors, stopping all collection efforts, all harassment, and all foreclosure actions." As such, most collection activity temporarily stops. Below is a sample list of some of actions the automatic stay may temporarily stop upon filing for bankruptcy.
Once you file for bankruptcy, the automatic stay prohibits actions, such as:
1. Collection activity involving credit card debts.
2. Collection activity involving medical debts.
3. Collection activity involving attorney fees.
4. If a governmental agency is trying to collect overpayments of certain benefits (i.e. Medicaid), they cannot reduce/terminate your benefits.
5. Utilities from being discontinued (limited).
6. The IRS from issuing a lien against your property.
7. In some cases, paying a financial debt associated with a criminal proceeding will be paused.
Even when you file for bankruptcy in Michigan, the automatic stay does not stop all actions. Some of these actions not prohibited by the automatic stay are:
1. Collection of child support and/or spousal support.
2. Modification of child support and/or spousal support.
3. Withholding of income to pay for child support.
4. Collection of back child support and/or spousal support.
5. Certain IRS tax proceedings (i.e. issuance of a tax deficiency notice or conducting an audit).
6. Eviction of a tenant, in certain cases.
7. Withholding income to repay a loan from an ERISA qualified pension.
Ypsilanti / Ann Arbor Bankruptcy Attorney Lander McLoyd is an experienced Michigan Bankruptcy and consumer law attorney. If you have questions about filing for Bankruptcy in Michigan or need to know more about the automatic stay, contact Lander McLoyd for a free Bankruptcy consultation. We're here to help!