Exceptions to the Bankruptcy Automatic Stay

Most people realize that when a bankruptcy is filed, the automatic stay stops most lawsuits against the debtor. However, there are exceptions under Section 362(b). For example, a lawsuit can proceed against someone that filed bankruptcy in order to establish paternity. Lawsuits to enforce child support obligations or visitation rights can also be brought even though the defendant filed bankruptcy.

A governmental unit can enforce police and regulatory powers against someone in bankruptcy, although there are restrictions relating to enforcing a judgment for money. A government can also proceed with a tax audit and demand tax returns, although not money owed under those tax returns. Also, if a landlord has obtained a judgment for possession, the filing of a bankruptcy does not stay the removal of the tenant. So, while the filing of a bankruptcy can provide relief from many types of regulations, it does not stop all litigations from going forward.

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