What is Automatic Stay?
An injunction that takes effect immediately upon filing bankruptcy, stopping most creditor collection actions including lawsuits, wage garnishment, and foreclosure.
Understanding Automatic Stay
The automatic stay provides breathing room for debtors to address their financial situation. Creditors must cease collection efforts and can be sanctioned for violations. The stay can be lifted by court order if creditors show cause, such as lack of adequate protection.
Examples
- 1Foreclosure sale stopped by bankruptcy filing
- 2Wage garnishment halted immediately
- 3Collection calls must cease
Related Terms
Bankruptcy
A legal proceeding that provides relief for individuals or businesses unable to pay their debts, allowing them to eliminate or restructure debt under court protection.
Chapter 7 Bankruptcy
A liquidation bankruptcy where non-exempt assets are sold to pay creditors, and remaining eligible debts are discharged, giving the debtor a fresh start.
Chapter 13 Bankruptcy
A reorganization bankruptcy where debtors propose a 3-5 year repayment plan to pay off all or part of their debts while keeping their property.
Discharge (Bankruptcy)
The court order that eliminates a debtor's personal liability for certain debts, meaning the debtor is no longer legally required to pay them.
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