What Is the Automatic Stay in Bankruptcy?

The Automatic Stay in Bankruptcy: What You Need to Know

If you’re drowning in debt, constantly getting calls from creditors, or facing threats of wage garnishment, foreclosure, or repossession, you might feel like there’s no way out. But there’s one powerful tool to stop it all: the automatic stay in bankruptcy.

The automatic stay is one of the most powerful tools for stopping debt collectors in their tracks. As a bankruptcy lawyer, I’ve seen firsthand how it gives people much-needed relief while they figure out their next steps.

So, let’s break it down: What is the automatic stay? How does it work? And what does it actually stop?

What Is the Automatic Stay?

The automatic stay is a court order that goes into effect immediately when you file for bankruptcy. This order stops most collection actions against you. It offers you a temporary break from creditor harassment, lawsuits, and other financial threats.

Think of it like a pause button for your debts. It gives you the breathing room you need to either discharge your debts (in Chapter 7) or create a repayment plan (in Chapter 13) without creditors taking aggressive actions against you.

Unlike other credit solutions – including negotiating directly with your creditors – the automatic stay has the power of the courts behind it. That means you don’t have to worry someone will go back on their word. The law protects you.

What Does the Automatic Stay Stop?

Once you get the automatic stay in bankruptcy, it legally prevents most creditors from:

✅ Wage Garnishment

Since a creditor often needs a court order to garnish your wages, a court-ordered automatic stay is also one of the only ways to stop the garnishment. If a creditor is taking money directly from your paycheck, the automatic stay stops it immediately. You’ll start receiving your full wages again.

✅ Foreclosure

If your home is in danger of foreclosure, filing for bankruptcy puts the process on hold. This can give you time to catch up on missed payments or explore other options. If you’re looking specifically at stopping foreclosure, we can help.

✅ Repossession

If you’re behind on car payments, the automatic stay stops your lender from repossessing your vehicle. It works similarly to stopping a foreclosure from going through. And just like with foreclosure, Chapter 13 bankruptcy might be the best option for you.

✅ Collection Calls & Letters

The automatic stay is a legally binding order to stop all debt collection. That means no more harassing phone calls, emails, or letters from debt collectors. If creditors keep contacting you after the stay is in place, they’re violating the law. Tell them to speak to your lawyer.

✅ Lawsuits from Creditors

If a creditor is suing you for unpaid debt, the automatic stay puts it on hold. This gives you and your attorney the time to sort things out through bankruptcy.

✅ Bank Account Freezes

If a creditor has frozen your bank account, the automatic stay can help release those funds so you can access your money again.

What the Automatic Stay Doesn’t Stop

While the automatic stay is a powerful tool, it doesn’t stop everything. Some debts and legal actions can continue.

Child Support and Other Court-Ordered Payments

For example, if you owe child support or alimony, those payments won’t stop, even if you file for bankruptcy. Similarly, if you have court-ordered fines or criminal charges, bankruptcy won’t stop those proceedings.

Some Tax Debts

The IRS also has certain protections. The government may still be able to collect some tax debts as a result. However, bankruptcy often helps reduce or reorganize your tax debt. To find out more about your options, we offer a free consultation where we can discuss any tax debt you may have.

How Long Does the Automatic Stay Last?

The automatic stay remains in effect throughout your bankruptcy case.

If you’re filing for Chapter 7, the stay usually lasts for a few months until your debts are discharged. If you’re filing for Chapter 13, the stay lasts throughout your repayment plan, which could be 3-5 years.

In rare cases, a creditor might ask the court to lift the automatic stay, especially in a foreclosure. In those cases, your bankruptcy lawyer can fight the motion and defend your rights in court. So make sure you always choose a lawyer who has great reviews and communication. As with any attorney, you need to trust that they will fight for you every step of the way.

What If You’ve Filed for Bankruptcy Before?

The court uses the automatic stay to protect you, but there’s a catch: you need to use that time to deal with your debt.

If you’ve filed for bankruptcy once in the last year but didn’t complete the process, the automatic stay may not last. You’ll have to prove to the court that your situation has changed and you’re deserving of another attempt for some reason.

If you’ve filed multiple bankruptcies in a short period, the court may not allow the automatic stay at all.

Your attorney can figure out how these rules might affect you and help you navigate the process.

How Do You Make the Most of the Automatic Stay?

The automatic stay is one of the biggest advantages of filing for bankruptcy, but you need to act quickly to get the full benefit.

First, work with a bankruptcy lawyer. The automatic stay gives you a break, but it’s temporary. You need a plan to manage your debt long-term, whether that’s discharging it through Chapter 7 or reorganizing it with Chapter 13.

Once you’ve had a free consultation, you should file as soon as you know it’s the right fit. If you’re facing foreclosure, repossession, or garnishment, filing for bankruptcy immediately can stop it. But if you wait too long, you run the risk of losing your assets or income.

When you file, your attorney and the courts will also notify your creditors. So you can enjoy some peace and quiet from their harassment.

Take Control of Your Debt Today

If you’re tired of debt collectors, lawsuits, or the fear of losing your home or car, bankruptcy might be the solution you need. And the automatic stay can give you immediate relief and a chance to get back on track financially.

If you’re considering bankruptcy but aren’t sure what to do next, let’s talk. I can help you understand your options, file your case quickly, and protect your rights. Reach out today, and let’s take the first step toward your fresh start.

Just contact me online today or give us a call at 901-327-2100. We look forward to talking with you and helping put an end to your debt problems for good.