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The Automatic Stay for Criminal Defendants

Criminal defendants are often faced with a multitude of legal problems, besides the obvious ones, there can be civil litigation 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.

What is the Automatic Stay

The automatic 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 the Automatic Stay 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 pre-petition liens;
  6. any act to collect, assess, or recover pre-petition claims against the debtor; and
  7. the enforcement of any set off 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.