The “automatic stay” stops just about all actions by your creditors against you or your property as of the moment your bankruptcy case is filed. “Stay” is just a legal word for “stop.” It’s “automatic” because the very act of filing your case “operates as a stay” against the creditors’ actions. (Section 362(a)(1) of the U.S. Bankruptcy Code.)
Very Wide Coverage
The automatic stay gives you a breathing spell which protects you and your assets in just about every possible way from your creditors. It stops all phone calls and letters from them, their garnishments and lawsuits—“any act to collect, assess, or recover” a debt. The automatic stay also stops vehicle repossessions and home foreclosures, stops the IRS from recording a tax lien, and creditors from suing you from getting a judgment and judgment lien—“any act to create, perfect, or enforce any lien.” (Section 362(a)(2)-(6).)
Very few legal procedures work as quickly and efficiently as the automatic stay. That’s because even though it behaves like a court injunction, it does not even involve a judge. It operates as a one-sided and immediate court order, made effective simply by the filing of your bankruptcy case. The automatic stay gives you an immediate breathing spell, whether your creditors like it or not.
Motions to Lift the Automatic Stay
However, the creditors can have a say about the automatic stay quite quickly if they want. Any creditor can file a motion to lift, or for relief from, the automatic stay. This is a procedure for creditors to ask the bankruptcy judge for permission to again chase you or your property. Most of these motions are filed by secured creditors wanting to continue to pursue the collateral—to repossess a vehicle or foreclose on a house. Whether or not the creditor’s motion is granted depends on a series of conditions including: the status of your payments on the debt, your intentions about future payments, evidence about your ability to fulfill those intentions, and the value of the collateral compared to the amount of the debt. (Section 362(d)-(g).)
When Does an Automatic Stay Begin?
An automatic stay begins the moment you file for bankruptcy. As soon as the stay starts, unsecured creditors are out of luck in trying to collect the debt on their own. Secured creditors can file a petition for relief if they show adequate cause.
What Does an Automatic Stay Do?
When you file your initial bankruptcy petition, everything gets placed on hold. It is like you freezing your creditors from pursuing any more collection of the debt you owe. Creditors can’t start judicial proceedings against you, try to obtain your property, or enforce a lien. All your debts are frozen in time.
How Do I Get an Automatic Stay?
In order to obtain an automatic stay, you must file for bankruptcy. In order to be eligible for bankruptcy, you need to talk to an experienced bankruptcy attorney. They will go over the specifics of your case and discuss your options for filing.
Exceptions to the “Automatic Stay”
Here is a list some of the most common exceptions. The indicated kinds of creditors CAN do the following even after you file bankruptcy:
- A district attorney or other similar prosecutor can begin or continue an ongoing criminal case against you. This includes issuing an indictment, holding a criminal trial, or having a sentencing hearing. We’re not just talking about felonies or serious misdemeanors, but also more routine matters like traffic violations that you might not think of as “criminal.”
- Your ex-spouse, about-to-be ex-spouse, your child, or some person or governmental agency on their behalf, can start or continue a variety of divorce and family court proceedings. These include legal procedures to establish paternity of a child, determine or change the amount of child or spousal support to be paid, settle child custody or visitation issues, address domestic violence disputes, and even dissolve the marriage. (However, a marriage dissolution does violate the automatic stay if it involves the division of assets or debts between the spouses.)
- On the specific issues of child and spousal support, the person who is owed ONGOINGsupport can continue collecting it. If there is BACK support owed, the person who is owed the support can in most cases start or continue collecting it in spite of a Chapter 7 filing. This includes not only through wage withholdings and garnishment of bank accounts, but also seizure of tax refunds and other possible aggressive means. In contrast, the person who is owed the BACK support MUST STOP collecting on that IF a Chapter 13 filed arranging to pay that BACK support.
- The IRS or other taxing authorities can start or finish a tax audit, can send you a notice that you owe taxes, can demand you to file your tax returns, can assess your taxes and demand you to pay them, and in some limited situations can even file tax liens against you and your property.
Note that each of these exceptions applies only to certain special kinds of creditors and/or debts. Again, the automatic stay stops MOST actions against you by MOST creditors. Indeed for most people filing bankruptcy, ALL collection action is stopped for ALL of their creditors. That will likely be the case for you, unless you are involved in a court proceeding or collection efforts by the criminal or taxing authorities, or by an ex-spouse or support enforcement agency.