The Automatic Stay

One of the more common terms you will hear during the course of a Chapter 7 bankruptcy is an “automatic stay.” An automatic stay is a stop on most collection actions against the debtor or the debtor’s property, and is pursuant to 11 USC §362. It is one of the more powerful benefits of filing a Chapter 7. The automatic stay arises by operation of law and requires no judicial action. This means that once the bankruptcy petition is filed, creditors are immediately and automatically prohibited by law to take collections actions against you or your assets. As long as the stay is in effect, creditors generally cannot initiate or continue lawsuits filed against you, garnish your wages, lien your property, levy your bank accounts, or even make harassing telephone calls to you.

Although the automatic stay is a beneficial and powerful tool in bankruptcy, it is not applicable in every situation. For instance, it will not stop 1) any criminal actions or proceedings against the debtor, 2) the withholding, suspension, or restriction of a driver’s license or professional or occupation license, or 3) an audit by a governmental unit to determine tax liability. There are other more nuanced situations where the automatic stay cannot help, but it will help against general consumer collection actions.
Please consult with the attorneys at Tran Bankruptcy Law to see how the automatic stay can help your situation.