Schwartz Bankruptcy Law Center
Louisville 502-485-9200
New Albany 812-945-9200
Toll Free 866-366-3328

What is the automatic bankruptcy stay and how does it work?

People in Kentucky who are contemplating filing for personal bankruptcy are aware that a bankruptcy filing can "protect" them from their creditors, but the exact mechanics of this protection are not well understood. In this post, we will provide an overview of one of the most important provisions of the federal Bankruptcy Act, the so-called "automatic stay," and its application to personal bankruptcy.

In general terms, a stay is an order from a court that halts - or stays - another proceeding. Once a stay is issued, the proceeding that is the target of the stay must stop, and it cannot go forward until the stay is lifted. When a person or company files a petition for bankruptcy in federal bankruptcy court, the act of filing the petition operates as a stay that is generally applicable to all judicial and administrative proceedings involving the debtor, including collection actions, garnishment proceedings and foreclosure actions. The automatic stay gets its name from the fact that it automatically applies to these proceedings without any further action by the debtor.

The automatic stay effectively stops any and all collection proceedings and actions to enforce liens against real property. The stay also stops court cases in which the debtor faces the possibility of a financially adverse outcome. The stay also prevents harassing telephone calls from debt collectors and threats of repossession of assets such as automobiles.

The automatic stay does not stop every proceeding. Among important exceptions are actions for delinquent child support, determination of paternity, divorce proceedings, and foreclosure of mortgages on properties where the Department of Housing and Urban Developer has insured repayment of the underlying loan.

Obtaining the stay is not difficult, but enforcing it can by a complicated legal matter. Anyone thinking about bankruptcy may wish to consult an experienced bankruptcy lawyer for advice on how the automatic stay might affect his or her specific situation.

Source: Cornell University Law School, 11 U.S. Code § 362 - Automatic stay, accessed on March 4, 2017

No Comments

Leave a comment
Comment Information
  • NACBA- National association of consumer bankruptcy attorneys
  • LexisNexis- AV -Peer review rated
  • Kruger & Schwartz BBB Business Review
Contact Our Attorneys

Privacy Policy | Business Development Solutions by FindLaw, part of Thomson Reuters.

Back to top