How An Automatic Stay Protects You Against Creditor Claims In Business Bankruptcy
When your business falls on tough times and you have trouble meeting your debts, harassing calls and threatening actions on the part of creditors only make matters worse. Filing for business bankruptcy in New York can provide a solution to your financial problems while also putting an immediate step to collections actions. Find out more about the automatic stay in business bankruptcy and how it can help protect you.
What Is An Automatic Stay and How Does it Protect You?
Filing for bankruptcy can help meet the needs of businesses in two important ways. If you are closing your doors due to financial problems, filing a Chapter 7 bankruptcy petition allows you to liquidate existing assets and eliminate unsecured outstanding debts. If you are looking to remain in business, Chapter 11 bankruptcy allows you to restructure some debts and eliminate others, providing the breathing room you need. In either case, an automatic stay goes into effect once you file your bankruptcy petition, providing protection from creditor harassment and collections actions.
What is an automatic stay? Available through a provision in the US Bankruptcy Code, it temporarily prevents banks or other lenders, credit card companies, utility, land and equipment owners, collection agencies, government entities, or others from taking the following actions against you:
- Calling you, emailing, sending statements, or otherwise contacting you in regards to outstanding debts;
- Shutting off utilities, repossessing equipment, or moving to foreclose on property;
- Creating, perfecting, or enforcing liens;
- Taking other legal actions against you in an effort to collect outstanding debts.
If you have been hounded for months by creditor collections calls and legal threats, the automatic stay provided by filing for bankruptcy can provide immediate relief. It can also prevent you from losing land, equipment, or other items necessary in running your business. The automatic stay lasts throughout your bankruptcy proceedings, which varies based on the type of business bankruptcy you file. Non-debtors associated with the business may also benefit by petitioning the court to have the stay extended to them.
Exceptions To The Automatic Stay
The protection against creditor claims, harassment, lawsuits, and repossessions provided by an automatic stay is a major advantage when considering filing for business bankruptcy. However, there are exceptions to the automatic stay that you need to be aware of. Under Section 362 of the United States Bankruptcy Code, this includes:
- Child support and alimony payments, as well as paternity proceedings;
- Money owed as a result of legal judgments in criminal proceedings;
- IRS audits, assessments, and tax refunds;
- Securities contracts in closing out open positions;
- Eviction proceedings in cases where the lease was terminated prior to filing for bankruptcy.
Contact an Attorney Today for Help
To find out more about the protections afforded through an automatic stay and to discuss which type of bankruptcy may best benefit you, reach out to the Law Office of Harry D. Lewis. Give us a call or contact our New York City business bankruptcy attorney online and request a free consultation today.