What is an automatic stay and how does it affect pursuing loan foreclosures?
Upon the filing of a Bankruptcy petition, the debtor receives immediate protection from the collection efforts of creditors through a §362 automatic stay. The automatic stay is one of the most fundamental elements of the bankruptcy code and acts to ensure an orderly distribution procedure that is otherwise hindered by the creditors’ conventional race to the assets. The Bankruptcy Code provides for stiff penalties to be assessed against creditors who knowingly violate the stay. The automatic stay is triggered by the filing of the bankruptcy petition and the petition date is definitive regarding the commencement of this protection. §362(a) defines the scope of the automatic stay by listing all of the acts and actions that are stayed by the filing the petition. A bankruptcy petition filed at any time up until the actual moment of the foreclosure sale acts to automatically stay the foreclosure proceeding. Relief from the stay is needed to commence or continue any proceeding to divest the d
