What is an Automatic Stay in Bankruptcy?


When a debtor files a bankruptcy petition, an automatic stay goes into effect. This stay prohibits creditors from taking any collection action against the debtor or the debtor’s property.

Creditors must cease all attempts to collect a debt, including wage garnishments, repossessions, and foreclosures.

The automatic stay gives the debtor some breathing room to reorganize their finances and get back on their feet.

Filing for bankruptcy comes with several big considerations but one benefit to filers is an automatic stay that goes into effect upon filing.

This court-ordered injunction prevents creditors from trying to collect on debts through any means such as suing the debtor, calling or writing to demand payment, garnishing wages, or repossessing items they have previously used as collateral.

These protective measures are in place until a decision is made regarding the petition or until a discharge order is entered by the court.

It’s important to note however that an automatic stay does not always apply in every case and certain types of debts may continue to be collected even while a bankruptcy petition is pending.


The Automatic Stay Provides a Much Needed Stopgap

The automatic stay is an essential tool for those looking to gain financial protection from overwhelming debt.

It provides an immediate stop to all creditor harassment, as well as any other action creditors are taking or attempting to take in order to collect a debt.

These restrictions are put into place immediately upon filing bankruptcy and provide a much-needed relief to those struggling financially.

Without the automatic stay, creditors would be allowed to contact individuals directly, minimize access to bank accounts, and even issue a judgment that could result in seizure of assets–all while the individual is in the process of reorganizing debt through bankruptcy.

The automatic stay offers an invaluable stopgap against these actions, allowing individuals the time they need to secure their finances and start rebuilding.


Automatic Stay in Bankruptcy


Court Permission Required to Take Action Against You

When a debtor defaults on their financial obligations, creditors may serve the debtor with legal papers known as “collection action.”

It is important to note, however, that in order for a creditor to take any action against the debtor, they must receive permission from the court.

This process can be a lengthy one and requires creditors to file motions seeking judicial approval. Depending on the laws of your state and the situation at hand, creditors must provide certain information and documents to show that their claims are valid before they get permission from the court.

Once they have permission from the court, then creditors will be able tto take action against debtors who owe them money or assets.


Assets are Protected During the Bankruptcy Process

Many individuals who have found that their finances have spiraled out of control and seek protection from creditors may find relief in bankruptcy proceedings.

During the bankruptcy process, many of the debtor’s assets are exempt from repossession or liquidation. This can include a certain value of an individual’s real estate, personal property, household items, retirement plans and other financial accounts such as bank accounts.

With current laws protecting those seeking relief through bankruptcy, many debtors can rest assured that much of their hard-earned money will remain safe during this often stressful experience.


The Bankruptcy Trustee

The role of a bankruptcy trustee is far-reaching and vital to the bankruptcy process.

Bankruptcy trustees are responsible for gathering and distributing assets, providing notices to creditors, and administering the estate according to applicable regulations.

They must also assess creditors’ claims, evaluate property exemptions, and abide by procedural standards. In order to accomplish these goals timely and effectively, the bankruptcy trustee must be knowledgeable of laws, procedures, and court decisions in addition to possessing the necessary financial acumen.

A competent bankruptcy trustee can play an integral role in assisting those who have filed for bankruptcy with their financial struggles.


Bankruptcy Trustee


Post-Bankruptcy Discharge of Debts

After a debtor has gone through the bankruptcy process, they can breathe a sigh of relief knowing that their debts are discharged.

This means that creditors no longer have the ability to pursue collection on any debts that were included in the bankruptcy filing. While this is beneficial for debtors, it does not mean that it will be easy for them to get back on their financial feet. But it is a good starting point as they work toward rebuilding their credit.

The specific terms of discharge vary depending on what type of bankruptcy was filed, and certain types of debt may still need to be paid off or partially paid off even after the discharge.

It is advised that debtors seek professional help from an experienced bankruptcy attorney familiar with bankruptcy regulations so they can make sure they understand all of the rules surrounding discharge and have a clear understanding of what impact filing for bankruptcy will have on their finances moving forward.


Summing It Up

A bankruptcy petition filing activates an automatic stay, which bars creditors from collection actions. This means that any attempt to collect on a debt, such as through phone calls or letters, must cease until the court grants permission for the creditor to take action.

The debtor’s assets are also protected during this time and cannot be seized by creditors without court approval.

When a bankruptcy case is underway, the trustee is responsible for administering the estate and distributing assets to creditors according to the provisions of the bankruptcy code.

Once the bankruptcy is complete, the debtor is discharged from their debts and can begin rebuilding their financial life.


Learn More

At Blue Bee Bankruptcy, our lawyers are highly experienced in the foreclosure and bankruptcy filing options. More importantly, we understand that each case we receive is unique and each client has different needs and goals. We will discuss these signs with you and decide the best route to take.

We strive to help our clients rebuild their lives and take steps toward a better financial future through filing. 


Best Bankruptcy Attorneys in Salt Lake City

If you’re dealing with the potential of bankruptcy, give us a call. Our team will work to help you by reviewing all of the options our firm has available. We will ensure you’ll get the best possible outcome for your situation.

Get in touch today so we can start working on either halting bankruptcies or preventing them from taking place altogether!

Contact Us Today For Help! You can schedule your free consultation online or call us at (801) 285-0980.


Blue Bee Bankruptcy Law Firm

Rebuild Your Life After Bankruptcy
Get FREE information on rebuilding your credit.
Start Today