Definition
An automatic stay is an injunction that prohibits a creditor from taking any further action against a debtor to collect on a debt. The automatic stay is triggered by filing bankruptcy under any chapter of the United States Bankruptcy Code.
Analysis
When a debtor files for any type of bankruptcy in the United States, an automatic stay is triggered. The stay protects the debtor from creditors under the oversight of the bankruptcy judge.
When an automatic stay is in place, creditors are prohibited from:
- Making collection calls
- Filing suit or continuing a lawsuit against the debtor
- Repossessing property
- Selling property through foreclosure
- Garnishing wages
The automatic stay is an important aspect of bankruptcy proceedings. By filing for bankruptcy and triggering an automatic stay, a debtor may be able to avoid or at least temporarily delay having property repossessed or foreclosed on, or having a judgment against them pursued.
