The Automatic Stay (Protection from Creditors)

Upon the filing of a bankruptcy, an injunction (called the “Automatic Stay”) goes into effect which in most circumstances stops creditors from most collection actions. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Prohibited collection actions are listed in Bankruptcy Code §362. Common examples of prohibited actions include contacting the debtor by telephone, mail or otherwise to demand repayment; taking actions to collect money or obtain property from the debtor; repossessing the debtor's property; starting or continuing lawsuits or foreclosures; and garnishing or deducting from the debtor's wages. Under certain circumstances, the stay may be limited to 30 days or not exist at all, although the debtor can request the court to extend or impose a stay. For example, if you are behind on car payments when you file your petition, the lender may file a motion for relief from the stay seeking the Bankruptcy Court’s permission to repossess the car.

Filing of the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. Any prior bankruptcy cases dismissed within one year prior to the filing of the new case, the stay may not go into effect, or may be effective for only a short period of time (such as 30 days) unless you take action to impose (establish) or continue the stay. In addition, in certain situations, a creditor may file a motion for “relief” from the automatic stay.

See also: 

Bankruptcy Code Section 362

Local Rules of Bankruptcy Procedure 4001-1