The Automatic Stay in Bankruptcy

Bankruptcy · 5 January 2023

The automatic stay is a provision in the bankruptcy code that provides a temporary injunction against most collection efforts while a bankruptcy case is pending. It goes into effect automatically when a bankruptcy petition is filed and helps to provide debtors with some relief from creditor actions while they are working to reorganize or liquidate their debts through the bankruptcy process. The purpose of the automatic stay is to give the debtor a breathing spell and an opportunity to get their financial affairs in order, without interference from creditors. The stay can provide valuable protection for the debtor, by preventing creditors from taking actions such as:

• Garnishing wages or seizing bank accounts
• Foreclosing on a home or repossessing property
• Filing or continuing a lawsuit against the debtor
• Calling or contacting the debtor about the debt

The automatic stay can be a powerful tool for debtors who are facing immediate financial pressures and need some time to catch up on their bills or make a plan to deal with their debts. It can also help to level the playing field between the debtor and their creditors, by giving the debtor some time to negotiate with creditors or to seek legal advice before taking further action.

This article is general information, not legal advice about your situation. Reading it does not create an attorney–client relationship.