What is the Automatic Bankruptcy Stay?

I often explain to my Atlanta bankruptcy clients that the automatic bankruptcy stay is the key to protecting debtors from foreclosures, repossessions, garnishments, and any other harassment by creditors. The “automatic stay” is a court order that is effective immediately upon a debtor’s bankruptcy filing. The order prohibits creditors from taking actions to collect debt from debtors, which is the primary reason why most of my clients file bankruptcy. The automatic stay is provided for in 11 U.S.C. 362 of the Bankruptcy and is one of the strongest tools to protect debtors that we have at our disposal.

The automatic stay occurs immediately upon filing of the bankruptcy case and does not require a court proceeding or hearing. Within a week of the filing, the bankruptcy clerk of the court mails notice to all of the creditors that a debtor lists in his or her bankruptcy petition. Thus, if a debtor receives a phone call from a creditor the day after filing bankruptcy, the debtor simply needs to tell the creditor that he or she has filed bankruptcy and provide the case number. As for foreclosures or repossessions, the bankruptcy attorney who files the case normally contacts the creditor to stop those actions as soon as the bankruptcy case is filed. The automatic stay remains in effect until one of three things occurs: (1) the stay is “lifted” or stopped by a judge at a creditor’s request; (2) a discharge occurs; or, (3) the property at issue does not belong to the estate anymore. Post-discharge, the stay is replaced with a permanent injunction from the court that covers all pre-filing debts that were part of the bankruptcy proceeding. That means that creditors are prevented from collecting on all the debt that was discharged.

If you have filed bankruptcy in the past the 2005 amendments to the bankruptcy code may place some restrictions on the automatic stay in your case. It is important to speak with a qualified attorney and make sure to tell your attorney about any past bankruptcies. For a free consultation please contact the Law Offices of Charles Clapp at 404.585.0040.