What is the Automatic Stay?
When you file a bankruptcy petition, your creditors are automatically barred from taking any action to collect the debts owed them or seizing your property. There are some exceptions. For example, a bankruptcy petition does not stay the commencement or continuation of a criminal action (unless brought to collect a debt), an action to collect alimony, maintenance or support from certain assets or income, or an action to enforce a government’s police or regulatory power.
The “stay” is an injunction against creditors, who are “stayed” from trying to collect their debts when a person files for bankruptcy relief. The stay is “automatic” because it becomes immediately effective against creditors, whether they know about it or not. The automatic stay effectively stops foreclosures, repossessions, lawsuits, IRS levies, bank account garnishments, and many other types of collection efforts. There are some exceptions to the automatic stay (see below), but generally, a creditor can only resume collection efforts after getting court permission to do so.
The filing of a petition under chapter 7 or chapter 13 “automatically stays” most actions against the debtor or the debtor’s property. 11 U.S.C. 362. This stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally cannot initiate or continue any lawsuits, wage garnishments, or even telephone calls demanding payments. Creditors normally receive notice of the filing of the petition from the clerk.
The filing of the petition creates an automatic stay under 11 U.S.C. §362 prohibiting all collection actions. 11 U.S.C. §§ 301, 302, 101(42) – unless the Debtor has filed a prior bankruptcy in the last 12 months. The Stay is good for only 30 days if filed one prior case in last 12 months. §362(c)(3)(A). This is no Stay at all if 2 or more cases in last 12 months. §362(c)(4)(A)(i) A dismissed case is a filed case. There is no excuse for failure to understand the requirements. A motion to extend the Stay must be filed within 30 days.
The Automatic Stay is a statutory order that automatically stops (“stays”) all collection actions against the debtor filing for bankruptcy protection. The Automatic Stay is a basic protection afforded U.S. debtors. In fact, the United States Senate has stated that: “The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors, stopping all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.
