FAST RELIEF from Debt Collectors: The Automatic Stay

What is the automatic stay?

The automatic stay protects a debtor who files for bankruptcy from further collections efforts by creditors. Once the creditor has received notification the debtor has filed bankruptcy, all collection activity must cease including pending foreclosure, repossession, or wage garnishment.

When does an automatic stay take effect?

The automatic stay takes effect immediately. All collection activity must cease. Creditors may only communicate through the debtor’s bankruptcy attorney. Upon the first notice from the creditor, the debtor must advise the creditor he has filed bankruptcy and provide the name, address, and telephone number of the attorney.

The automatic stay takes effect immediately. It protects a debtor who is filing for bankruptcy from further collections efforts by creditors.

Which bankruptcy types provide an automatic stay?

The automatic stay applies to Chapter 7, Chapter 11, and Chapter 13. In all cases, the creditor must immediately stop any collection activity. It remains in effect until after the court finalizes the bankruptcy and decides how the debts will be repaid.

Who is protected by the automatic stay?

The automatic stay protects debtors from any collection activities by creditors or third-party collectors. Creditors receive no protection, but in some cases, they can apply for relief from the stay. It is up to the bankruptcy court whether to agree.

What do I have to do to be protected by the automatic stay?

Filing for bankruptcy provides you, the debtor, with an automatic stay.

Specifically, what does the automatic stay do?

  • Stops calls and letters from creditors and debt collectors.
    The creditors and debt collectors you list in your petition for bankruptcy receive notification via the court clerk.
  • How soon will the calls stop?
    Calls and all other collection activity must stop immediately upon notification.
  • What happens if a collection agency continues to call?
    Notify your bankruptcy attorney if they continue to call. The lawyer will contact the collection agency to ensure they updated your records. As a result of deliberately violating the automatic say, they could face legal action.
  • Stops foreclosures, evictions, repossessions, utility shutoffs, lawsuits
    An automatic stay protects the debtor from foreclosures, repossessions, and most civil lawsuits.
    It may permit eviction if the landlord received the judgement prior to the date of your bankruptcy filing.
    The automatic stay does not specifically cover utility shutoffs. However, another section prohibits shutting off your utilities because you filed bankruptcy and named them among your creditors.
  • Protects against garnishments
    What income is not subject to garnishment?
    • Retirement income from an ERISA-qualified retirement plan (e.g., pension, 401(k), 403(b), etc.)
    • Disability payments and Social Security benefits
    • Veterans’ Federal Benefits
    • State disability benefits (ABD)
    • State welfare benefits (TANF)
    • SSI benefits
    • Coronavirus stimulus payments until September 1, 2020, at the earliest
    • Compensation for unemployment (the exception would be if you owe child support)
    • Any child support payments you receive
    • Federal student loans
  • Are there exceptions?
    Income subject to garnishment includes past-due child support, alimony and spousal support, back taxes, certain legal obligations, and money you owe because of a criminal proceeding.
    The automatic stay protects retirement benefits and Social Security Disability Benefits from garnishment except to contribute toward paying child support, federal tax debt, and alimony.
  • What income is NOT protected?
    Any income you earn is subject to garnishment if you live in a state that permits it. Some states prohibit garnishment of wages but allow seizure of a percentage of the debtor’s bank funds.

What does the automatic stay NOT do?

The automatic stay does not end any domestic court cases such as divorce, domestic violence, actions concerning paternity, or child support, child custody, or visitation hearings. It does not stop suspension or restrictions on a driver’s license for non-payment of child support.

How long does it stay in effect and what happens when it ends?

The automatic stay ends when the court discharges the bankruptcy. Collection activity may resume on any debts not discharged. In the case of a Chapter 7, this occurs only after the sale of assets and distribution of money to creditors. However, the court discharges any remaining balances at that time.

Are there state variations or anything else I need to know about the automatic stay?

The automatic stay does not protect the debtor from any personal injury lawsuits, especially those related to motor vehicle injury accidents caused by substance abuse. It applies only to creditors you listed in your bankruptcy petition.

Thinking about bankruptcy?

Credit Yogi can help you find the answers to your bankruptcy questions. Just call toll free 866-964-9644. Our database includes more than 160,000 professionals operating in every zip code in the United States. It’s 100% FREE and you never have to hire anyone. Ever.

Request a Call Back
close slider

    Request a Call Back




    Yes I agree to Privacy Policy, Term & Conditions, DNC Disclaimer

    CA residents click here for data rights