The Automatic Stay
The U.S. Bankruptcy Code Section 362 provides immediate protection to the debtor. This protection is an injunction called, the "Automatic Stay." It goes into effect automatically when the bankruptcy case is filed.
The Automatic Stay will immediately:
- stop creditor calls
- stop garnishments
- stop foreclosures
- stop repossessions
- stop lawsuits
If a creditor intentionally violates the injunction, the creditor can be held in contempt and can be subject to court sanctions. Usually, though, creditors are careful to avoid violations of the automatic stay.
Lifting the Automatic Stay
Under certain circumstances, a creditor can obtain permission from the court to resume collections. If the court grants this permission, the stay will be "lifted," and the creditor can resume collections, such as foreclosure or repossession. Most creditors do not seek to lift the Automatic Stay.