What Is the Automatic Stay in Bankruptcy?

Minnesota's Bankruptcy Law Firm for More Than 40 Years

Section 362 of the Bankruptcy Code spells out the exact meaning of the automatic stay in bankruptcy. The automatic stay goes into effect the day that a debtor files a Chapter 7 or Chapter 13 bankruptcy. From that time on, creditors are prohibited by the bankruptcy court from making any attempts to collect on the debts that are included in the bankruptcy filing.

Which Creditors Are Included in the Automatic Stay?

A notice of the automatic stay will go out to all creditors and debt collectors who are included in the bankruptcy petition. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. Be sure not to omit or forget any debts when you file your petition. If you do not list a debt, that creditor will not receive a notice of the automatic stay, and that debt will not be included in your bankruptcy. Furthermore, failure to list all your debts could be cause for dismissal of your bankruptcy case by the court.

What Types of Debt Collection Practices Are Prohibited in the Automatic Stay?

What is the automatic stay and what does it mean to you when you file bankruptcy? Once the automatic stay is in place, creditors cannot collect on debts or harass you in any way:

  • Send bills or letters
  • Call the debtor or friends, neighbors, family members or an employer about the debts
  • Initiate lawsuits against the debtor
  • Garnish wages
  • Levy bank accounts
  • Seize assets

If you file bankruptcy, should you worry about any legal action that a creditor might take to try to overcome and bypass the automatic stay? This might be a concern if you are working with an inexperienced bankruptcy attorney who might commit some technical error in your filing. When you do business with Prescott Pearson & Tande, PA, we can reassure you of our track record of success. We have filed more than 70,000 bankruptcies in Minnesota since 1975.

If your bankruptcy petition is successful, the collection prohibitions of the automatic stay will become permanent when your debts are discharged. A creditor that violates the automatic stay or ignores the debt discharge may be subject to penalties including liability for the debtor's attorney's fees.

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To learn more about the automatic stay and your Chapter 7 and Chapter 13 bankruptcy, call or email our bankruptcy lawyers today. We offer free initial consultations, quality services at competitive rates and effective representation statewide.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.