What Is an Automatic Stay?

Lawyer giving consultation to client

An automatic stay is a simple one-page document. Once you file for bankruptcy, your Los Angeles bankruptcy attorney sends this document to creditors, notifying them of your situation. It legally prohibits them from taking various actions. Although creditors can motion to remove or modify an automatic stay, violating it can lead to sanctions by the federal Bankruptcy Court. A creditor may also be held in contempt.

One of the main reasons people file for bankruptcy is to be protected against creditors’ collection actions. An automatic stay, or court order, can stop most collection actions against your or your property, whether from a creditor, collection agency, or government entity. It is a major component of a Chapter 7 or Chapter 13 bankruptcy and can help on many levels.

What Does an Automatic Stay Prevent?

Bankruptcy isn’t only about wiping out debt. It can provide at least temporary relief in some serious situations. These include but are not limited to:

  • Foreclosure: An automatic stay stops any foreclosure proceedings. You can even keep your home with Chapter 13 bankruptcy. Once your three- to five-year payment plan is established, you’ll be able to start getting caught up on back payments. With Chapter 7 bankruptcy, the relief will only be temporary because this kind of filing doesn’t help retain your home.
  • Eviction: Temporary relief is more likely if facing evicted. Any eviction proceedings already in place, pertaining to a judgment or possession against you by the landlord, won’t be affected. An automatic stay also won’t help if you’ve endangered the property or used controlled substances there. In other cases, you might be given extra days or weeks. However, courts usually side with landlords who ask the stay be lifted.
  • Wage Garnishments and Collection of Public Benefits: Bankruptcy stops most wage garnishments, allowing you to take home your full salary, in addition to having credit card and other debt discharged. You can therefore work on getting your financial life back on track. Also, if you were overpaid on public benefits, agencies can no longer collect overpaid amounts. But agencies can still deny or terminate benefits for other disqualifying reasons.
  • Utility disconnections: Although bankruptcy is typically filed for other reasons, an automatic stay can prevent water, telephone, electric, or gas service from being disconnected for at least 20 days. However, utility companies often require a deposit to ensure they will be paid in the future. Contact your Orange County bankruptcy attorney if your utility is threatening to disconnect your service.

How Is an Automatic Stay Initiated?

According to 11 U.S. Code § 362, you’ll receive at least temporary protection if a legal proceeding has been initiated against you, the debtor; a judgement is enforced prior to a bankruptcy; or an estate property is possessed or a lien is enforced against it. An automatic stay can go into effect if a claim is collected, assessed, or recovered against a debtor. It can also begin if there’s a setoff of debt owing to the debtor or a proceeding regarding tax liability begins or continues.

Expert Bankruptcy Services from OakTree Law

If you’re struggling with debt and facing collection actions, OakTree Law can explain your options and help you make the best financial decisions. Our Orange County and Los Angeles bankruptcy attorney helps clients who are facing foreclosure, wage garnishment, and harassing phone calls from creditors. Filing for bankruptcy can end all the trouble with an automatic stay. Call 562-219-2979 to learn more or submit your information to request a free evaluation today!