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Important limits on the reach of the automatic stay in Tennessee

This blog has frequently mentioned the importance of the automatic stay under Section 362 of the United States Bankruptcy Code as a method of halting collection efforts by the debtor's creditors. The automatic stay goes into effect immediately upon the filing of the bankruptcy petition, and after the petition is filed, no creditor can pursue a collection action or request payment of an existing debt from the debtor. In spite of this enormous benefit, the automatic stay has important limitations that should be understood by anyone who wants to use it as a shield against creditor's claims.

The automatic stay does not affect the commencement or continuation of a criminal action against the debtor. The following civil actions are exempt from the effect of the automatic stay: to determine paternity, establish or modify an order for domestic support obligations, establish child custody or visitation and regarding domestic violence. Divorce proceeding are also exempt from the automatic stay, except for that portion of the proceeding concerned with determining the division of property that belongs to the bankrupt estate.

The automatic stay is also prevented from affecting a number of miscellaneous actions. It does not affect a proceeding to revoke, suspend or limit a driver's license or any professional or occupational license. Actions of governmental bodies to determine tax liability or assess a tax deficiency are likewise not subject to the stay.

Section 362 contains a number of additional provisions that limit the application of the automatic stay in particular situations. A consultation with an experienced bankruptcy attorney can provide a complete analysis of the effect of the automatic stay on an individual debtor's financial situation.

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