In a Bankruptcy case, the Automatic Stay is a Federal Law that provides protection from creditors bringing any civil legal actions against you or taking collection actions, such as calling you, sending letters to you or texting you. There are very few exceptions to the automatic stay, with child support and spousal maintenance, and prosecution of criminal or administrative cases as the most common exceptions. The stay operates as an injunction against your creditors and it is “automatic” meaning that you do not have to ask the judge for it. You get the automatic stay simply by filing your case with the Bankruptcy Court.
The Stay is effective immediately upon the filing of a bankruptcy case. This means that the IRS cannot collect any tax debt, a mortgage company cannot foreclose on your home or hold a Trustee’s Sale, an automobile lender cannot repossess your car(s), and any lawsuit against you by a creditor or lender is put on hold. Nevertheless, when you file your case you and the Court are the only people that know about the automatic stay until the court mails notices to everybody on your mailing list in about a week. You or your lawyer can also give special notice immediately upon filing but the best practice is to file your case at least 2 weeks before any “deadlines” such as foreclosure sales.
The stay is effective for the duration of your case until your case is discharged. However, you should stay attentive to see what creditors may file in Court and know that you, or your lawyer, may need to timely respond to a “Motion to Lift Stay” or risk serious consequences. For example, if the automatic stay is lifted by a mortgage creditor, your home can be sold even though you are still in bankruptcy because when the stay is lifted you lose the protection it gives you against that particular creditor.
There also may be concerns with the automatic stay if you are a “serial filer”. See our blog on that topic.