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automatic stay in wisconsin

Making the decision to file for bankruptcy can be a difficult one for business owners. However, if you’re being harassed by creditors and aren’t confident in your ability to repay your creditors, doing so can be a good choice. When you file for bankruptcy, you’ll trigger what’s known as an automatic stay which can give you some relief from those creditors. Here’s what you need to know about automatic stays before you schedule an appointment with a Wisconsin business bankruptcy attorney. 

What Is an Automatic Stay?

An automatic stay is a court-ordered hold or freeze on a creditor’s ability to contact you regarding the repayment of debts you owe. It prevents them from emailing, calling, texting, or attempting to sue you and your business for recovery of the money. The stay triggers as soon as you file for bankruptcy and applies to Chapter 7, Chapter 11, and Chapter 13 filings. 

What Does This Mean for Business Owners?

The stay effectively means business owners get a little breathing room once they file for bankruptcy. It prevents creditors from contacting you about repayment and pauses any court proceedings that might cause a lender to foreclose on your property or equipment. It also makes it illegal for creditors to repossess any items used as collateral on the loans they issue. 

When the automatic stay is in place, you’re legally permitted to sue creditors who come after you. If you’re successful, the court may order your creditor to pay a fine or pay your attorney’s fees for any legal work resulting from their violation of the stay. 

How Long Does the Automatic Stay Last?

Automatic stays last until your bankruptcy case is settled. If you’re filing Chapter 7 bankruptcy, the stay expires when your debts are dismissed, or your case has been settled by the court. The exact length of the stay will vary depending on the type of bankruptcy you file for and the complexity of your case. For most businesses, automatic stays can last between several months to a year. Your Wisconsin business bankruptcy attorney will be able to give you more insight into how the stay will work with your case.  

Creditors Can Request an Exception

There are times when certain creditors may take issue with the automatic stay. After all, they can’t collect what they’re owed when the automatic stay is in place. This is why some creditors choose to request that the court lift the stay with regard to their claim. If they’re granted a lift of the stay, they can resume trying to get money from you.

Ultimately, it’s up to the court to decide if the creditor’s petition is valid. The creditor must show clear reasons why the stay shouldn’t apply to them. For example, if you file for Chapter 13 but the negotiated repayment plan isn’t enough to help you repay the creditor requesting the lift of the stay, the court will likely agree to their request. 

However, if the creditor is trying to take possession of a piece of collateral like your company’s building, the bankruptcy court will likely deny their request. Why? Because the property is valuable and foreclosing on it could impact your ability to make payments to all of the creditors involved in your repayment plan.

Automatic Stays Can Be a Helpful Tool

Automatic stays are designed to help businesses navigate the bankruptcy process without having to deal with the added pressure of creditors hounding them for payments. For many business owners, automatic stays can be reason enough to file for bankruptcy. But that doesn’t mean you should start the process without fully weighing the pros and cons. Let an experienced Wisconsin business bankruptcy attorney at Kerkman and Dunn help. Contact us today to schedule a free consultation.  

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