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Automatic Stay Exemptions
What are the exceptions to an Automatic Stay?
Criminal Activity
11 USC 362(b)(1)
Domestic Support Obligations (D.S.O.)
11 USC 362(b)(2)
Automatic Stay Tax Exemptions
Automatic Stay Exempts Small Businesses
Usual bankruptcy rules do not usually apply to small businesses. These situations include when the debtor, a person or a business, is in a bankruptcy case for a small business or was in such a case in the last two years. The debtor's repayment plan confirmation or case dismissal has no effect. The exemption to the Automatic Stay also applies when a company buys most of a bankrupt small business. But, this is only true if the company bought it fairly and not just to get around bankruptcy rules. This condition is so a small business can liquidate assets during bankruptcy if they do it in good faith and not to avoid allowing the trustee to pay back creditors.
Other Exemptions
Naturally, with any advantageous solution, there are exceptions. The Law Office of Christopher Hewitt can help you navigate the different aspects of an Automatic Stay and determine if your situation qualifies. Christopher Hewitt has filed thousands of bankruptcies throughout Riverside, Orange, and San Bernadino counties for the last 20 years. With the addition of our office in San Clemente, we can service Los Angeles and San Diego counties.
Criminal Activity
11 USC 362(b)(1)
Any debtor with a criminal action or proceeding already begun or is in process is not eligible for an Automatic Stay. For example, if you are using your home to operate any illegal business, the court will not allow you to continue to use the home just because you have filed for bankruptcy.
Domestic Support Obligations (D.S.O.)
11 USC 362(b)(2)
The court recognizes that certain legal matters, especially those related to family and civil actions, are more urgent and cannot be paused because of bankruptcy. Legal processes involving paternity, child support, child custody or visitation, divorce, or domestic violence continue as usual, even if someone has filed for bankruptcy. In divorce cases, if there's a need to divide property that's part of the bankruptcy, this aspect must wait until the bankruptcy process addresses it. However, the automatic stay doesn't stop collecting child support or alimony from assets not part of the bankruptcy. Similarly, it doesn't interfere with the usual process of deducting these support payments directly from the person's income.
Automatic Stay Tax Exemptions
Uncle Sam won't allow an Automatic Stay to get in his way of collecting due taxes. The I.R.S. will still demand tax returns, give audits to determine tax liability and give notices of tax deficiencies. In addition, if you owe taxes, the government can still assess your tax bill and ask you to pay it, even if you've filed for bankruptcy. They can send you a notice telling you how much you owe. However, if they usually put a lien (a legal claim) on your property because of these taxes, they can't do that immediately because of this tax bill. This lien will only occur if you don't clear the tax debt through bankruptcy and if the bankruptcy process returns the property or its monetary value to you.
Automatic Stay Exempts Small Businesses
Usual bankruptcy rules do not usually apply to small businesses. These situations include when the debtor, a person or a business, is in a bankruptcy case for a small business or was in such a case in the last two years. The debtor's repayment plan confirmation or case dismissal has no effect. The exemption to the Automatic Stay also applies when a company buys most of a bankrupt small business. But, this is only true if the company bought it fairly and not just to get around bankruptcy rules. This condition is so a small business can liquidate assets during bankruptcy if they do it in good faith and not to avoid allowing the trustee to pay back creditors.
Involuntary bankruptcy cases against the debtor, where they are not involved, and there's no hidden agreement with creditors, still follow the Automatic Stay exception rules. The court will approve a workable repayment plan that doesn't involve selling off assets if the debtor can show that the bankruptcy filing was due to unforeseen circumstances beyond their control.
Other Exemptions
The list of exemptions for an Automatic stay is lengthy and complicated, so you must use an experienced bankruptcy attorney like Chris Hewitt to help you. Below is a list of other less abstract exemptions:
- Specific government actions, including driver's license suspension and tax refund interception.
- Acts to perfect property interests.
- Actions by governmental units or organizations exercising regulatory power.
- Certain financial and securities-related activities.
- Foreclosure actions by the Secretary of Housing and Urban Development.
- Actions involving nonresidential real property leases, negotiable instruments, and specific maritime actions.
- Actions by educational and licensing bodies.
- Swap and netting agreement activities.
- Statutory liens for taxes.
- Pension-related withholdings.
- Enforcement of liens and security interests in real property.
- Eviction actions under specific circumstances.
- Specific actions by health and sports organizations.
