Bankruptcy Chapter 7 & 13

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Protection From Creditors

There are 5 sections of the Federal Bankruptcy Code that give protection from creditors. Chapter 7 and Chapter 13 are designed to help consumers, like most of us, get a fresh start, free from debt. Other sections (Chapter 9 for governmental units, Chapter 11 for reorganizing large businesses, and Chapter 12 for farms) are not discussed on this web site.

Bankruptcy gives immediate protection from virtually all ordinary creditors through an automatic stay.  This stay goes into effect with the filing of a bankruptcy case.  [11 USC �362

These are examples of some of the many creditor's actions stopped by the filing of a Bankruptcy:

The stay puts creditor's actions on hold.  It does not eliminate their claim.  The claims of unsecured creditors will generally be eliminated by the discharge when the Bankruptcy is completed (see Debt Not Discharged for some exceptions).  Creditors secured by things that you own, such as a car or your home, will have additional rights which will need to be handled in the bankruptcy (see Secured Debt for more information).

Certain kinds of actions are not stopped by the filing of a bankruptcy.  These include:

  • Criminal proceedings.  [11 USC �362(b)(1)
  • Dissolution of Marriage (divorce) proceedings, except to the extent that they seek to divide property of the estate.  [11 USC �362(b)(2)
  • Proceedings concerning child support, visitation, paternity, or domestic violence.  [11 USC �362(b)(2)(A)
  • Child support orders, including collection from wages and tax refunds, and suspension of drivers licenses for failure to pay support.  [11 USC �362(b)(2)(C), (D), (E)
  • Tax audits, notices of tax deficiencies, demand for tax returns, tax assessments and notices (although the actual collection of tax is put on hold).  [11 USC �362(b)(9)
  • Other actions not ordinarily effecting consumer bankruptcy cases.  See 11 USC �362(b) for more information.

A caution if you had a prior bankruptcy pending within the past year.  It is the automatic stay which stops or prevents creditors collection actions (including repossession, garnishment, foreclosure, etc.).  If you filed one previous case which was pending within the past year, the stay will end on the 30th day after the filing of the present case.  The stay will not go into effect at all if you filed two or more previous bankruptcy cases which were pending within the past year.  To have the stay take effect longer where there was a single previous case, or at all where there was more than one previous case, you must file a motion with the court and demonstrate "that the filing of the later case is in good faith as to the creditors to be stayed."   Prior cases which were dismissed under  11 USC �707(b) for abuse of the code and failure to meet the means test are excluded in determining how long or whether the stay will take effect.  [11 USC �362(c)(3) and 11 USC �362(c)(4)]

What if you had a prior bankruptcy within the last 8 years?  See Who is Eligible.


This page was last revised: 02/18/09