What Is An Automatic Stay?

In bankruptcy, an automatic stay has the same function as an automatic injunction, which basically puts a stop on any collection efforts being pursued by creditors with regards to a debtor who has declared and filed for bankruptcy. The Unites States Bankruptcy Code governs automatic stays, and more specifically, under section 362, the Code provides that the automatic stay commences from the moment that the bankruptcy petition is filed. To be more precise, as soon as the bankruptcy has been filed, the creditors cannot call the debtor, write to the debtor, or file suit against the debtor. If a lawsuit had been previously filed prior to the filing of the bankruptcy, the lawsuit will be placed on hold, and will not resume unless the bankruptcy court has made that determination. Of course, creditors have the opportunity to object to the automatic stay, and bankruptcy courts have the discretion to remove the automatic stay upon a showing that the creditor is not adequately protected or, if for example, the creditor proves that his or her interest in specified property is at risk.

Call Smith and Garg today at 1-877-517-4275 or complete our Contact Form and let us assist you with your bankruptcy.