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What exactly is an automatic stay?

June 29, 2022

By Diane Drain Attorney & Retired Law Professor

The filing of the bankruptcy results in an automatic stay of all collection actions under 11 U.S.C. 362.

Unless the Debtor has filed a prior bankruptcy within the previous 12 months, 11 U.S.C. 301, 302, 101(42). If you’ve already filed one case in the last 12 months, the stay will be good for only 30 days. §362(c)(3)(A). If there have been two or more cases in the last 12 months, there will be no stay at all. §362(c)(4)(A)(i) A case that has been dismissed has been filed. There is no justification for failing to comprehend the standards. Within 30 days, a motion to prolong the stay must be filed.

The debtors must file a Plan of Reorganization.

BNC will mail a copy of the plan to all creditors, who (in some cases) appear at a Plan Confirmation hearing, if there is one.
The Plan’s contents is governed by Section 1322, which requires the Debtor to submit all “disposable income” income to the Chapter 13 Trustee for the following 3-5 years, excluding certain authorized expenses. (§1325(b)(2)) The term “disposable income” is defined differently in Chapter 13 than it is in Chapter 7.The length of the Plan is determined by a number of factors that are too many to detail in this brief summary of responsibilities. The bankruptcy code allows any person who files for bankruptcy to maintain fundamental assets that are deemed necessary for a “fresh start” after bankruptcy. This property is referred to as the debtor’s “exempt property”.

When debtors file for bankruptcy, they are generally concerned that they will lose their personal belongings and home commodities.

No-asset cases make up the majority of Chapter 7 cases. That is, unless the debtors owe back child support or alimony/maintenance, the debtors pay up nothing to the trustee. In that instance, the Trustee has the authority to sell all of the Debtor’s assets, whether or not they are exempt. If the Debtor’s assets exceed the exemption list, Chapter 13 is a good option if the Debtor wants to keep his or her property. The Debtors will pay the resale value of the assets that were not on the Arizona exemption list under the Plan. Once this is completed, the Debtors are free to keep such assets unless the taxing authorities or secured creditors have the right to seek them.

By |Published On: June 29th, 2022|Last Updated: July 28th, 2022|

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About the Author: Diane Drain

Diane L. Drain - Bankruptcy LawyerDiane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.

*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*

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