Download The Automatic Stay Criminal defendants are often faced with a

 The Automatic Stay
Criminal defendants are often faced with a multitude of legal problems, besides the obvious
ones, there can be civil litigations and creditor claims. While the discharge of most debts is the
primary bankruptcy benefit, arguably the most useful protection under the Bankruptcy Code is
the automatic stay. This broad power is essentially an injunction that takes effect immediately,
and automatically, upon case filing. The stay halts the majority of creditor efforts to collect or
recover on claims. While the protections of the automatic stay are not absolute, the stay can be
an important tool to allow a defendant time to focus on the criminal defense and to preserve
income and assets for that purpose.
What It Protects Against
Bankruptcy Code section 362(a) provides that the stay prevents: (1) the commencement or
continuation of actions against the debtor; (2) the enforcement of pre-bankruptcy judgments
obtained against the debtor or property of the bankruptcy estate; (3) any act to obtain or exercise
possession or control of property of the bankruptcy estate; (4) any act to create, perfect, or
enforce any liens against property of the estate; (5) any act to create, perfect, or enforce prepetition liens; (6) any act to collect, assess, or recover pre-petition claims against the debtor; and
(7) the enforcement of any setoff rights. Thus, the automatic stay is a particularly effective
device for stopping the ceaseless collection efforts of creditors. It means that the debtor can
avoid paying legal fees and costs in civil lawsuits and does not have to worry about judgments
being enforced against income, bank accounts and other property.
What It Does Not Protect Against
There are limited exceptions, enumerated in section 362(b), that allow certain actions to proceed
against the debtor or the debtor’s property. Specifically, section 362(b) provides that the
following actions are not stayed: (1) the commencement or continuation of criminal proceedings;
(2) the commencement or continuation of certain family law actions, including divorce, custody,
and paternity disputes; (3) the commencement or continuation of an action by a governmental
unit or organization using its enforcement or regulatory power; and (4) certain actions relating to
tax liability, including audits, issuance of notice of tax deficiency, tax return demands, and tax
assessments.
Additionally, there are limited situations when a creditor can obtain relief from the automatic
stay and proceed against the debtor. One is when there is a secured claim, like a mortgage or car
loan that the debtor is behind on payments. The creditor can ask the Bankruptcy Court to allow
it to foreclose on the real property or repossess the automobile because either the asset is worth
less than the debt, the claim is being increased by the lack of payments and that is making it
harder for the creditor to recover on the loan if it has to wait a long period before it can liquidate
the asset. In a chapter 11 case (yes individuals with high asset value or large debts can use
chapter 11) the creditor can argue that the property is not needed successfully reorganize.
What It Means for Criminal Defendants
The use of a bankruptcy case can be a tactical move in a criminal defendant’s overall strategy,
one that can take the pressure off of financial and creditor concerns and allow the focus to be on
obtaining an acquittal. The automatic stay will provide that breathing space.