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What Is an "Automatic Stay" in Bankruptcy?

When a person files for Chapter 7 or Chapter 13 bankruptcy, they are afforded a protection known as an "automatic stay." In simple terms, an automatic stay is a court injunction which immediately stops any lawsuit filed against you and most actions against your property by a creditor, collection agency, or government entity. This stay has legal effect immediately upon filing for bankruptcy and does not require creditors to receive an official notice.

The automatic stay is one of the most powerful tools and compelling reasons for struggling debtors to file for bankruptcy, as it can provide you with much-needed breathing room to collect yourself and reorganize your finances without the constant pressure of collection actions.

An automatic stay can protect you against:

  • The loss of utilities
  • Collection calls
  • Repossessions
  • Eviction
  • Foreclosure
  • Wage garnishment

An automatic stay will remain in effect until you receive a discharge, your bankruptcy case is closed, or if the stay is lifted by a bankruptcy judge at the request of a creditor.

Limitations of the Automatic Stay

While powerful, the automatic stay is not absolute. While an automatic stay can cease wage garnishments and tax liens by the Internal Revenue Service (IRS) over unpaid tax debts, IRS audits or other forms of contact may not be stopped. Likewise, criminal actions and legal actions regarding unpaid support obligations are unaffected by an automatic stay.

Repeat bankruptcy filers are also limited in their protections under automatic stay. If a debtor has had a prior bankruptcy case dismissed within the past year, the stay will only last 30 days. If they have two or more pending bankruptcy cases in the past year, there is no stay at all. In these situations, a debtor must file a motion with the court and petition for these protections.

Overwhelmed with Debt? Call (951) 779-1610

If you are struggling under the weight of debt, contact the Murrieta bankruptcy lawyers at Singleton Smith Law Offices today. Having earned a Client Distinction Award from Martindale-Hubbell® and numerous 5-star client testimonials for out unparalleled knowledge and skills, our team of professionals can handle all aspects of your bankruptcy filing and guide you towards a debt-free future.

Contact us online today to discuss your legal options in full detail.