In VERY RARE circumstances, ALL of your creditors can pursue you EVEN if you file for bankruptcy. Here’s how to avoid these rare but serious circumstances.

In my last blog I listed three special classes of debts for which you can still be pursued even though you filed for bankruptcy. They are exceptions to the broad protection of the automatic stay that you get immediately when your case is filed.  But today I’m talking about situation where the automatic stay doesn’t apply to your case AT ALL, against ANY of your creditors. And where you can lose the protection of the automatic stay 30 days after your case is filed.

Because of the huge importance of the automatic stay, you absolutely want to avoid these circumstances, as rare as they might be.

If you are thinking about filing for bankruptcy and have NOT filed a case within the last year which was then dismissed, you can stop worrying.  This won’t apply to you.

But, IF you filed TWO OR MORE  bankruptcies within the year before your new one, AND they were dismissed, the automatic stay does NOT go into effect with the filing of your new case.  The automatic stay CAN however be put into effect AFTER the case is filed if you meet certain conditions.

Or, IF you filed ONE prior case within the year before your new one, the automatic stay WILL EXPIRE 30 days after the filing date, unless you meet certain conditions before then. 

The details of the conditions for starting or preserving the automatic stay are beyond the scope of this blog. What IS of immediate and absolute importance is that you must tell your attorney—AT the BEGINNING of your INITIAL CONSULTATION—if you have filed ANY prior bankruptcy cases, and especially any recent ones.

Now if you’re wondering who goes around filing multiple bankruptcy cases in a year?  It happens more often than you might think.  It tends to come up in one of two ways:

1) A person files a bankruptcy without an attorney, gets overwhelmed by the process and doesn’t follow through, so the case gets dismissed; or

2) Or a person hires an attorney, signs some papers, and the case gets filed and then gets dismissed because he or she (or the attorney, for shame) doesn’t follow through.

In either case, eleven months later they’ve forgotten all about it. Or don’t think it’s important.

The point of these anti-automatic stay rules is to stop “serial bankruptcy filers,” the very, very small minority of folks who file multiple bankruptcy cases, arguably abusing the bankruptcy process, usually to repeatedly delay a foreclosure or some other creditor action.  But these rules can also seriously penalize innocent people in situations like the ones  just mentioned.

Avoid this happening to you by:

1) thinking carefully about whether there is ANY possibility that you filed a prior bankruptcy case within the last year, and

2) then telling your attorney if there’s ANY chance that you did.

If so, there’s a good chance the bankruptcy court can be persuaded to start or retain the automatic stay, but only if your attorney knows about the issue in advance and determines whether your case qualifies.