What is the Automatic Stay?
The filing of a bankruptcy petition automatically stays (stops) most actions, including collections, foreclosures and repossessions, against the debtor or the debtor’s property. It is called “automatic” because the stay begins automatically at the time the bankruptcy case is filed with the Clerk’s Office. Once the stay is in place, creditors are prohibited from taking certain actions against a debtor without court permission. Some creditors, particularly those involved with repossessions or foreclosures, may immediately file pleadings with the court to go forward with foreclosure or repossession actions.
At the moment a bankruptcy petition is filed, your creditors are automatically restrained from taking any action to collect the debts owed them. There are some exceptions, for example, a bankruptcy petition does not stay the commencement or continuation of a criminal action, an action to collect spousal support, or an action to enforce a government’s police or regulatory power.
When you file your bankruptcy, an automatic “stay” (or protection against creditor harassment and repossession) is immediately in effect. If a creditor files a Motion for Relief from that “Stay”, that creditor is asking for the permission of the Bankruptcy Court to foreclose or repossess your property. A creditor is not allowed to repossess or foreclose on your property after you file bankruptcy without an express written court order. A Motion for Relief from the Stay is the judicial procedure by which a creditor seeks permission of the Bankruptcy Court to take back your property.
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 automatic stay is good for only 30 days if that Debtor has filed one prior case in last 12 months. §362(c)(3)(A). If the Debtor wants to extend the automatic stay they must file a motion to extend the Stay immediately after filing the bankruptcy. There is no automatic stay if the Debtor has filed 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 a Debtor’s failure to understand these limitations.
