Automatic Stay In Bankruptcy
An automatic stay is an injunction that is issued automatically upon filing a bankruptcy petition which stops all lawsuits and all other collection activity against a debtor. The automatic stay does not discharge a debt, it merely suspends any proceedings to collect the debt until the stay is lifted or the bankruptcy case ends. An automatic stay restrains creditors from sending collection letters, calling the debtor regarding collection, suing on the debt, garnishing wages, repossessing property, foreclosing on home mortgages, or any other activity to collect a debt. The stay continues until the bankruptcy case concludes.
However, not all legal actions subject to the automatic stay. There are several exceptions to the automatic stay. The most common actions an automatic stay does not stop are:
- Criminal proceedings
- Establishment, modification, or collection of alimony or child support
- Establishment of paternity
- Audits by governmental units to determine tax liability
- Co-signers or co-debtors
If a creditor tries to collect a debt after an automatic stay has been granted, a contempt of court action may be brought against the creditor. In a contempt of court action, the creditor will be made to stop the collection attempts, the creditor may be fined by the court, and the creditor may also have to pay damages caused by a violation of the automatic stay.
Automatic Stay In Bankruptcy
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