The Automatic Stay in Bankruptcy
The automatic stay is an injunction against against the continuance of any legal action against a debtor or the debtor’s property. 11 U.S.C. 362. The automatic stay protects a debtor from harassing collection calls, repossessions, foreclosure sales, and garnishment of wages. The protection from the automatic stay starts as soon as the debtor gets a bankruptcy case number.
For example, let’s say a creditor lawsuit has been filed against a person who lives in Dallas GA and that person comes to see me to file a Chapter 13 bankruptcy. As soon as we get a bankruptcy case number and notify the creditor of the bankruptcy filing, the creditor must stop all collection actions. Our normal course of action is to file a plea of stay in the local court requesting that the lawsuit be put on hold while the bankruptcy is active.
For another example, let’s say I have a client from Rome GA who is worried that their car creditor is about to repossess their car. Once we have a bankruptcy case number and we have notified the car creditor, the car creditor must stop all efforts to repossess the car. Any car creditor that ignores the filing of a bankruptcy case and repossesses a car post-petition can be severely punished by a bankruptcy court.
Another great benefit of the automatic stay is codebtor protection. A Chapter 13 can protect a codebtor who is liable with the a debtor on a specific debt. In order to keep this protection, the debtor must pay back the entire cosigned debt along with contract interest to fully protect the codebtor.
In Northwest Georgia, the automatic stay gives a debtor protection from creditors subject to the oversight of the bankruptcy judges in Rome, Georgia. After a bankruptcy case is filed, the automatic stay remains in effect until the judge grants a request of a creditor to end the stay or the debtor gets a discharge.
The automatic stay does not protect a bankruptcy debtor from criminal proceedings or actions to modify child support orders.