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Can a Bank Refuse the Automatic Stay in a Chapter 13?

I have heard this question come up frequently in recent days. In short, the answer is no. Any creditor, including a banking institution to whom you may owe money, has to recognize your automatic stay and respond appropriately. Let’s be clear about a few things. The “automatic stay” is simply a term that refers to the bankruptcy law that protects you from your creditors when your case is filed. It is automatic because it kicks in the moment your case is filed and it stays or prevents your creditors from taking action against you to collect on a debt. Just like any other law, it must be followed. Your creditors cannot pick and chose when to honor or ignore this law.

Once your bankruptcy case is filed, a creditor cannot call you or send letters as an attempt to collect a debt. Your creditors cannot file a lawsuit against you, repossess your assets, foreclose, disconnect your utilities, or garnish your wages. It protects you from a wide range of creditor behavior with very few exceptions, one of which is any underlying criminal proceeding.

So, don’t let a creditor fool you. The automatic stay is powerful. No bank, credit card debt collector, car lender, or mortgage lender can refuse to recognize it.

There are a few reasons why the automatic stay was created to protect individuals who file bankruptcy. In the context of a Chapter 13 Missouri or Illinois bankruptcy, it is intended to protect you and your family from the actions of creditors to allow you to develop a Chapter 13 repayment plan to pay back certain debts.

The entire function of a Missouri or Illinois Chapter 13 bankruptcy is to give a debtor the freedom, peace of mind, and time to come up with a coherent plan to pay back creditors. If your creditors do not follow the law and violate this particular protection, there would be no point in filing a Missouri or Illinois Chapter 13.

A St. Louis bankruptcy attorney can help you protect your family from the terrible harassment of your creditors, and it is important that you empower yourself by learning what options are available to you. Get free articles, blogs, and even publications like my Illinois and Missouri bankruptcy book, “Get Out of Debt: Secrets Your Creditors Don’t Want You to Know,” to learn more about your options for becoming debt free.

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