The automatic stay and its wider implications.

We have been asked many times from our clients about automatic stay, and we had discussed this matter in our blog also, But the questions are coming so often and the law has been changing, that we feel obligations to revisit this issue again.
The filing of a petition either voluntary or involuntary invokes the automatic stay. This as you may know is an umbrella against all kinds of collections and activities, and stops them right in their making. The automatic stay applies to all entities and is intended to protect the debtor and the estate.The stay acts to enjoin all efforts to collect on any debts, to take possession of collateral, to enforce or create a line, or to set off a debt against the debtor.
Bankruptcy Code Section 362(a) is very inclusive and provides that the filing of a voluntary or involuntary petition acts as a stay applicable to all entities and prohibits the following types of acts:

1. The commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under the Bankruptcy Code.
2. The enforcement, against the debtor or against the property of the estate;
3. Any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.
4. Any act to create, perfect, or enforce any line against property of the estate;
5. Any act to create, perfect, or enforce against property of the debtor any line to the extent that such lien secures a claim that arose before the commencement of the case under the Bankruptcy Code;
6. Any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under the Code;
7. The setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor.
8. Any proceeding before the US Tax Court.

What actions are not stayed?
1. Criminal proceedings;
2. Enforcement of domestic support obligations;
3. Action to perfect or maintain a purchase money security interest;
4. Enforcement of governmental regulatory and police power;
5. Setoff of mutual debts by certain creditors;
6. Eviction
(a) a landlord may continue any eviction or unlawful detainer action against the debtor if the landlord had already obtained judgment for possession of the debtor’s rented residence before the bankruptcy petition is filed.
(b) the landlord may continue any eviction action against the debtor seeking possession of the debtor’s residence if that action is based on “endangermerment” of the real estate property.

What are the penalties for violation of the stay?

-Punitive damag4es, fees, costs and contempt of court

What a Bankruptcy Discharge Means under Chapter 7?

The bankruptcy court grants a discharge to the person named as debtor. However, it should not be treated as dismissal which has entirely different meaning.
The collection of discharged debts are prohibited.
The discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example, a creditor is not permitted to contact a debtor:
– by mail,
– by phone,
– or otherwise,
– to file or continue a lawsuit,
– to attach wages or other property,
– or to take any other action collect a discharged debt from the debtor.
There are also special rules that protect certain community property owned by the debtor’s spouse, even if that spouse did not file a bankruptcy case.

What is the punishment?
A creditor who violates this order can be required to pay damages and attorney’s fees to the debtor including of course a contempt of court from the bankruptcy court. This, however, should not be mixed up with a creditor’s valid lien which was not avoided or eliminated in the bankruptcy case. Despite all this, a debtor may voluntarily pay his debts that has been discharged.

Debts that are discharged.
The chapter 7 discharge order eliminates a debtor’s legal obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged if the debt existed on the date the bankruptcy case was filed.

Debts that are not discharged.
Let us discuss debts which cannot discharged. Here is a laundry list of these debts:
1. Debts for most taxes.
2. Debts incurred to pay nondischargeable taxes;
4. Debts that are domestic support obligations;
5. Debts for most student loans;
6. Debts for most fines, penalties, forfeitures, or criminal restitution obligations;
7. Debts for personal injuries or death caused by the debtor’s operation of a motor vehicle, vessel, or aircraft while intoxicated.;
8. Some debts which were not properly listed by the debtor;
9. Debts that the bankruptcy court specifically has decided or will decide in this bankruptcy case are not discharged;
10. Debts for which debtor has given up the discharge protection by signing a reaffirmation agreement in compliance with the Bankruptcy Code requirements for reaffirmation of debts; and
11. Debts owed to certain pension, profit sharing, stock bonus, other retirement plans, or to the Thrift Savings Plan for federal employees for certain types of loans from these plans.

The law is complex, and it is always good to talk to a Nevada licensed attorney.

How defendant can request discharge of attachment in Nevada?

NRS 31.200 Grounds for discharge of attachment.

1. The Defendant may also, at any time before trial, apply by motion, upon reasonable notice to the Plaintiff, to the court in which the action is brought or to the judge thereof, for a discharge of the attachment, or the money or property attached through the use of a writ of garnishment, on the following grounds:

(a) That the writ was improperly or improvidently issued.

(b) That the property levied upon is exempt from execution or necessary and required by the Defendant for the support and maintenance of the Defendant and the members of the Defendant’s family.

(c) That the levy is excessive.

2. If the court or the judge thereof on the hearing of such motion shall find that any of the grounds stated in subsection 1 exist, the attachment and levy thereof shall be discharged. If the motion is based upon paragraph (c) of subsection 1 only, and the fact is found to exist, the discharge of attachment shall be only as to the excess.