Automatic stay

An automatic stay requires creditors to stop any debt collection activities once a debtor enters bankruptcy protection, thereby preventing them from seizing any assets. An automatic stay is triggered as soon as a debtor files a bankruptcy petition – there is no need to request the court to issue a specific order. As noted earlier, the automatic stay requires creditors to stop any debt collection activities, including the following:

  • Any actions to recover a claim
  • The enforcement of a judgment against the debtor obtained prior to the bankruptcy
  • Any actions to repossess property
  • Any actions to create, perfect, or enforce a lien against debtor property
  • The setoff of any debt owing to the debtor against any claim against the debtor
  • Any actions concerning a tax liability

If a creditor violates the automatic stay, it is in contempt of court, and so may be subject to fines.

The automatic stay continues in effect until the case is closed or dismissed, though a creditor can petition the court for relief from the stay under certain circumstances, usually when the debtor does not have any equity in a property that it controls.

Related Courses

Bankruptcy Tax Issues 
Corporate Bankruptcy