What Is an Automatic Stay?
One of the most stressful aspects of being in debt is dealing with creditors or collection agencies. Phone calls, letters, and legal actions such as foreclosure, wage garnishment, repossession, and lawsuits are extremely threatening and many people feel intimidated by them. An experienced bankruptcy lawyer can help protect your rights.
The U.S. Bankruptcy Code affords debtors with certain protections during bankruptcy, and the automatic stay is one of them. The automatic stay is a federal court order that prohibits creditors and other agencies from collection activity after you file a bankruptcy.
A stay is a legal action that suspends a case or a particular proceeding within a case with the purpose of protecting a party's rights. An automatic stay, as the name suggests, goes into effect automatically without requiring the lawyer to file a motion to request a stay. In other words, once a bankruptcy petition is filed with the Federal Court, the petition automatically triggers a stay. There are some exceptions, but generally the automatic stay offers broad protections.
The U.S. Bankruptcy Code, 11 USC § 362 - Automatic stay (http://www.law.cornell.edu/uscode/text/11/362), describes in depth all the legal consequences of an automatic stay once a debtor files bankruptcy.
Automatic stay benefits
Here are some benefits that an automatic stay provides for you:
- Prohibits creditors from initiating or continuing a foreclosure proceeding
- Prohibits creditors initiating or continuing repossession of property
- Prohibits creditors from initiating or continuing a lawsuit against you
- Stops wage garnishment
- Ends restraints against bank accounts
- Stops harassing calls from creditors or collection agencies
- Protects a co-signer if filing Chapter 13 bankruptcy
While filing bankruptcy is a last resort and serious measure that requires thorough consideration, the relief that debtors experience is immediate and substantial.
If evaluating bankruptcy as an option, an experienced bankruptcy lawyer can help you understand the legal steps involved, confirm that bankruptcy is the right remedy, and help you choose the right form of bankruptcy for your situation.