What is the Automatic Stay in Bankruptcy?


The United States Bankruptcy Code has a provision that automatically halts almost all collection actions against a debtor who files for bankruptcy under any chapter of the code, including under Chapter 7 and Chapter 13.

Chapter 7 bankruptcy is known as liquidation bankruptcy because it trades property liquidation for the discharge of qualified debts, while Chapter 13 bankruptcy reorganizes your debts into a manageable repayment plan.

In either type of case, a debtor is likely overwhelmed by debt and has been dodging collection calls and letters for some time. As soon as bankruptcy is filed, however, the automatic stay halts any actions against a debtor that seek to recover money owed, including enforcement of judgments obtained before the debtor filed for bankruptcy. Furthermore, the stay prevents a creditor from making any attempt to take possession of or control over a debtor’s property or to execute or enforce a lien against a debtor’s property.

The stay also prevents any creditor from initiating an action against the debtor to collect the debt, and even halts the initiation of a proceeding in United States Tax Court to recover tax liability of a corporate debtor.

The stay, however, does not stop lawsuits to establish paternity, various actions regarding domestic support obligations, child custody or visitation actions, divorce proceedings, and actions related to domestic violence. Furthermore, the automatic stay likely does not apply to property tax liens for taxes that are due after your bankruptcy filing.

If you’re a renter and are facing eviction, it is possible, depending on the circumstances, that filing for bankruptcy might allow you to stay in the property longer and even give you the opportunity to become current on your rent. However, if you file for bankruptcy and your landlord already has obtained a judgment for possession of the property, bankruptcy likely will not protect you. A landlord with a judgment for possession of the property usually can continue with an eviction proceeding so long as that judgment comes before you file for bankruptcy.

Filing for bankruptcy automatically brings the stay of further collection actions against the debtor into effect. Your bankruptcy filing lists all of your creditors, all of whom receive notice from the court that you have filed for bankruptcy and that the stay is in place, preventing creditors from pursuing further actions to collect debts.

If You Are Considering Bankruptcy in Salt Lake City, Call Jory L. Trease of JLT Law to Discuss Your Options

If you are struggling financially and considering filing for bankruptcy, you need to understand how the bankruptcy laws can work for you. The automatic stay could provide considerable, immediate relief from financial pressures. Take advantage of a free case evaluation to determine if an attorney can help you through the bankruptcy process. Call a bankruptcy lawyer at JLT Law at (801) 896-9444 or contact us through our online contact form.