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Automatic Stay Used In Detroit Bankruptcy

Posted by Peter Behrmann, Esq. On July 19th

Automatic Stay Used In Detroit BankruptcyBankruptcy Court

The Automatic Stay is one of the most powerful tools in bankruptcy, so powerful that is stopped an emergency motion hearing that was being held to strip the governor’s power to authorize the filing of the Bankruptcy in the first place.

Here is the time frame on how yesterday worked:

  • Throughout the day there was wide speculation that Detroit would file for Bankruptcy on Friday, the date Kevin Orr indicated months ago he would have his decision by.
  • At 3:37 PM Attorneys representing City of Detroit Pension boards filed an emergency motion seeking a restraining order preventing the governor of Michigan from signing off on the bankruptcy.
  • The emergency hearing was started at 4:11PM where they were informed that the city of Detroit had filed the single largest municipal bankruptcy ever just 5 minuends prior at 4:06PM putting in place the Automatic Stay that prevents any creditor from taking any collection action.

You see in most situations, the actual filing of the bankruptcy case itself automatically stays collection and other actions against the debtor, the debtor’s property, and co debtors.  This means that by simply filing a Bankruptcy you can immediately stop foreclosures, garnishments, lawsuits, and any other collection activity.  Even emergency motions seeking a restraining order from a creditor!


Soon all of the Detroit’s creditors will be mailed a notice making them aware that they cannot take the following actions against them:

“Prohibited collection actions against the debtor and certain co debtors are listed in Bankruptcy Code §§ 362 and §§1301. Common examples of prohibited actions include contacting the debtor by telephone, mail or otherwise to demand repayment; taking actions to collect money or obtain property from the debtor; repossessing the debtor’s property; starting or continuing lawsuits or foreclosures; and garnishing or deducting from the debtor’s wages.”

I often use the Automatic Stay in a Chapter 13 bankruptcy to save my clients homes from foreclosure, to save a car that had been repossessed, and to simply help my clients get back on their feet.  I have never had the opportunity to use it to prevent a restraining order from being imposed, but as we saw yesterday that happens to work too!

Peter & Jeri Behrmann are Livonia Bankruptcy Attorneys.  From our Livonia, Michigan location, we represent clients throughout Metro Detroit and beyond, including Garden City, Wayne, Westland, Redford, Dearborn, Taylor, Ann Arbor, Belleville, Northville, Novi, Farmington, Farmington Hills, Plymouth, Canton, and the Counties of Wayne, Oakland, Livingston, and Washtenaw. Our practice is limited to helping consumers like you file Chapter 7 and Chapter 13 Bankruptcy.

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