The Automatic Stay

     The automatic stay is an injunction that automatically stops all lawsuits, foreclosures, garnishments, and all collection activity against a debtor the moment a bankruptcy petition is filed.  A chapter 13 bankruptcy even protects co-debtors who are liable with the debtor on consumer debts.  The automatic stay remains in effect until (1) a judge grants relief from the stay at the request of a creditor, (2) the debtor receives a discharge, or (3) the item of property to be repossessed or foreclosed upon is no longer property of the bankruptcy estate.

     The automatic stay does not stop any criminal action against the debtor, nor does it stop a tax audit, a demand for tax returns, or the assessment of a tax (although the collection of taxes is stayed).  The automatic stay also does not stop actions for a domestic support order or the modification of such an order or actions to collect domestic support from property that is not property of the estate.

     A creditor who willfully violates the automatic stay may be liable for actual damages caused by the violation and sometimes for punitive damages.  Since the court usually takes several days to mail creditors notice of the bankruptcy, it is incumbent on the debtor or debtor's attorney to give actual notice to creditors who might take action without knowledge of the stay.  Creditor actions taken after the stay is in place are generally void or voidable.