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Texas Bankruptcy - Automatic Stay
In connection with every petition filed for Texas bankruptcy, 11 U.S.C. 362 provides a "stay" of further
collection of debts from a debtor's estate. The operation of the prohibition is automatically invoked without
the necessity of court review, permission, or
approval. After receiving a file number from the clerk, all debtors are immediately protected.
Creditors are assigned the burden of proving debtors are not entitled to
relief should they file a motion to lift stay. Bans on legal action act as an
injunction that prohibit creditors to begin or continue further collection
efforts for a wide assortment of debts.
Texas bankruptcy stops real estate foreclosures. With limited exception, all foreclosure actions are
prevented whether judicial, non-judicial, filed,
threatened or pending. All creditor actions for payment become null, without legal force or effect, and
creditors may not recommence legal action unless obtaining specific permission from the court after notice and
hearing. Debtors must receive written notice of all motions to lift the injunction and are provided with an
opportunity to be heard before the court rules on these motions.
Texas Bankruptcy Exceptions
The exceptions to an automatic stay are provided by 11 U.S.C. 362. For example, utility bills are covered
by a special clause which allows for termination of service
after 20 days. Many other types of collection efforts in a Texas bankruptcy are prohibited by the
automatic stay statute permanently, including the following: garnishment, phone calls, demand letters, and lawsuits for
collection.
Creditors who violate the injunction knowingly are subject to sanctions. The court retains
broad authority to prevent further violation and impose fines, civil sanctions,
and criminal sanctions against
creditors. Often creditors do not have actual notice when a case is filed, yet nevertheless
must comply. Texas bankruptcy courts tend to be lenient on creditors who violate the
stay before actual notice is received. However, after a creditor receives
notice, Texas bankruptcy courts quickly grow intolerant of violations and sanctions for knowing violations are
common.
For best results, debtors must carefully plan the selection of chapter, date of filing, and options. All options are not available to all debtors because of variation in financial histories, assets owned, and new income restrictions. Because of the complex nature of recent changes in federal law, the assistance of a qualified attorney or law firm is essential. With assistance, effective debt relief is readily available through the bankruptcy courts.
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