For most people, filing for bankruptcy is a last resort. It can be easy to dig yourself into a pit of debt that you are unable to climb out of. Once the bills start becoming due, it can feel like an ocean wave washing over you, with you struggling to stay above water. Not paying your bills can cause creditors to resort to collections actions, such as wage garnishment and repossession. Once you file for bankruptcy, however, all of those collections actions must stop. This is what is known as the automatic stay.

Understanding the Automatic Stay

The automatic stay is a provision in the U.S. Bankruptcy Code that temporarily halts collections attempts from all creditors. The automatic stay goes into effect immediately after you file for bankruptcy and prevents any and all creditors from contacting you about debts you may have with them. The automatic stay does not last forever. As soon as your bankruptcy case is finished, the automatic stay is lifted.

To be able to keep your property that’s collateral or security on a secured debt, you must give that secured creditor “adequate protection.”

In the bankruptcy system, debtors and creditors each get certain protections.

A creditor might file a motion to avoid violating the stay, or to get permission to take some action other than collect a debt.

In the last three blog posts we’ve covered five reasons why creditors ask for “relief from the automatic stay.” The first one is by far is the most common. Creditors ask for “relief from stay” to take back collateral, or to establish payment and other terms that you must meet to avoid losing the collateral.

A creditor may ask the bankruptcy court to let another court finish a lawsuit about liability and/or the amount of damages.

“Relief from the Automatic Stay”

Our last blog post was about the possibility of a creditor asking for “relief from the automatic stay.” The automatic stay refers to the immediate protection you receive from debt collection as soon as you file bankruptcy. (See Section 362 of the U.S. Bankruptcy Code about the “Automatic stay.”)

Filing bankruptcy stops creditors’ collections against you immediately. But sometimes a creditor tries to get permission to collect anyway.

In our last 10 blog posts we’ve been talking about the “automatic stay.” It is one of the most important and immediate benefits of bankruptcy. The automatic stay stops most kinds of creditor attempts to collect their debts against you, your income, and your assets.