When Stay Doesn’t Apply

The automatic stay is one of the most valuable protections available to a debtor and courts generally construe the stay broadly to effectuate the rehabilitative goals of the Bankruptcy Code. In most cases, automatic stay is enforced without any further action on the debtor’s part.  However, the stay does have limitations.  There is no automatic stay where individual debtor has had two or more prior bankruptcy filings dismissed within the preceding year.  Also, if the debtor filed one prior bankruptcy in the year before the new one, the automatic stay expires after 30 days of the filing date, unless during the initial thirty day period, a party in interest (usually the debtor or the bankruptcy trustee) files a motion with the court to extend the stay on the basis that the second filing was in good faith.

Automatic stay does not apply in the following cases:

  • Criminal Prosecutions:  The automatic stay does not apply to the commencement or continuation of any criminal action or proceeding whether in State or Federal Court against the debtor. However, in case of debts associated with criminal proceedings the debt component will be put on hold while the bankruptcy is pending and the criminal component will be allowed to continue.

  • Alimony, Maintenance, or Support:  Almost all proceedings related to divorce or parenting continue unaffected by the automatic stay. It does not prohibit the commencement or continuation of an action for the establishment of paternity, or the establishment or modification of an order for alimony, maintenance, or support, protection of a spouse or child from domestic violence, reporting overdue support to credit bureaus, interception of tax refunds to pay back child support, and withholding, suspending, or restricting drivers’ and professional licenses as leverage to collect child support.

  • Perfection of Certain Interests in Property: The automatic stay does not apply to certain acts to perfect, or maintain or continue the perfection of, certain interests in property or to the extent that such act is accomplished within certain grace periods.

  • Tax Proceedings: The automatic stay covers any act to collect any tax, or to create, or perfect, or enforce any tax lien. The IRS cannot issue a tax lien against the debtor’s income or property while the automatic stay is in effect. However, the IRS can continue certain actions, such as conducting a tax audit, issuing a tax deficiency notice, demanding a tax return, issuing a tax assessment, or demanding payment of an assessment.

  • Presentment of Negotiable Instruments: The automatic stay does not prevent the presentment of a negotiable instrument or the giving of notice of, or protesting dishonor of, such an instrument.

  • Pension Loans : The stay does not prohibit  withholding from a debtor’s income to repay a loan from an ERISA-qualified pension plan

  • Residential Tenant Evictions: Automatic stay does not apply if the landlord already has a judgment for possession against the debtor prior to the filing of the bankruptcy petition. Further, it  does not apply to eviction actions based on endangerment of the property or the illegal use of controlled substances on the property.

  •  Foreclosure of Security Interests in Real Property: The automatic stay will not apply to an action to enforce a lien against real property in circumstances where the debtor is ineligible to be a debtor or if the current case was filed in violation of a bankruptcy court order entered in a prior case.

Inside When Stay Doesn’t Apply