STAY or an AUTOMATIC STAY
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What is the automatic stay?
STOP! That is the message of the automatic stay to virtually all of a
debtor's creditors, secured and unsecured, when a petition under any
chapter of the Bankruptcy Code (e.g. Chapter 7, 11, or 13) has been
filed by or against the debtor. The automatic stay, in section 362(a) of
the Bankruptcy Code, is the bankruptcy equivalent of a temporary
injunction against virtually all creditor activity that might have the effect
of advancing the creditor's interest at the expense of the debtor or
property of the debtor's estate. The automatic stay provides the debtor
immediate calm amidst the storm of it's financial difficulties.
STOP! That is the message of the automatic stay to virtually all of a
debtor's creditors, secured and unsecured, when a petition under any
chapter of the Bankruptcy Code (e.g. Chapter 7, 11, or 13) has been
filed by or against the debtor. The automatic stay, in section 362(a) of
the Bankruptcy Code, is the bankruptcy equivalent of a temporary
injunction against virtually all creditor activity that might have the effect
of advancing the creditor's interest at the expense of the debtor or
property of the debtor's estate. The automatic stay provides the debtor
immediate calm amidst the storm of it's financial difficulties.
As noted in the relevant Senate Report:
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.
Notes of Committee on the Judiciary, Senate Report No. 95-989.
To emphasize and illustrate: a creditor with a claim that arose before commencement of the
bankruptcy case cannot contact the debtor requesting or demanding payment, cannot
request from the debtor security for existing unsecured or under secured debt, cannot
initiate a lawsuit against the debtor or pursue litigation activities in a pending lawsuit against
the debtor, cannot attempt to enforce a judgment against the debtor and must act to stop
enforcement activities that are already in motion (e.g. notify a sheriff to stop a wage
garnishment or to refrain from a scheduled execution sale), cannot perfect a lien against
property of the estate, cannot repossess collateral that is property of the estate, and cannot
initiate or pursue non-judicial or judicial foreclosure against property of the estate.
This debtor protection is truly automatic. No hearing is held, no judge's signature required.
It is invoked simply by the stamp of the bankruptcy clerk's time clock when a petition is
presented for filing. Creditors are bound by the automatic stay even before they know of it,
but sanctions attend only willful violations.
Generally, the filing of the bankruptcy case automatically stays certain collection and other
actions against the Debtor and the Debtor's property. If you attempt to collect a debt or take
other action in violation of the Bankruptcy Code, you may be penalized.
A bankruptcy petition, once it is filed, immediately operates as an automatic stay, which
holds in abeyance various forms of creditor action against the debtor. Automatic stay
provisions work to protect the debtor against certain actions from the creditor, including:
(1) beginning or continuing judicial proceedings against the debtor, (2) actions to obtain
debtor's property, (3) actions to create, perfect or enforce a lien against a debtor's property,
and (4) set-off of indebtedness owed to the debtor before commencement of the bankruptcy
proceeding.
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