The AUTOMATIC STAY is probably the most important feature of Chapter 7 Bankruptcy, separate and apart from actually receiving a DISCHARGE of debts. The commencement of a bankruptcy case (filing a PETITION) imposes an immediate and automatic stay (restraining order) upon all creditors. This is regardless of the bankruptcy Chapter that is chosen.
The source of this law is Section 362(a) of the Bankruptcy Code, which sets forth a list of the different types of actions against a debtor which are stopped (automatically stayed) by commencement of the bankruptcy case.
Some people wait until the last minute to take charge of their debt problems. That is probably just human nature. sometimes you might expect a loan modification or a new loan. Many people will need to file an emergency bankruptcy case to put the stay immediately into effect.
Here is what the The Automatic Bankruptcy Stay means to you. The AUTOMATIC STAY stops phone calls from bill collectors, the commencement of lawsuits against the debtor for the collection of money, enforcement of judgments, collection letters, demands for payment and other types of collection actions by creditors.
JEFF’S TIP: The Stay stops foreclosures and repossessions. Perhaps even more powerful is the fact that the automatic stay stops foreclosure and repossession. So this is an extremely powerful component of the bankruptcy laws and any debtor who is faced with the imminent repossession of a vehicle or the imminent foreclosure of real property will often resort to Chapter 7 if for no other reason than to gain time to try and resolve the debt problem and come up with a method of curing a default. Jeff Wishman is a Los Angeles bankruptcy attorney specialist with more than 30 years of experience.
What happens if a creditor violates The Automatic Bankruptcy Stay?
The violation of any court order is a serious matter. The Automatic Bankruptcy Stay is a powerful court order. It is applicable against all of your creditors. It even stops foreclosure. It even stops the IRS. If a creditor violates the stay, the creditor can be severely punished. Courts have punished intentional stay violations by making the creditor pay damages. Also, punitive damages may be assessed. And, the creditor may be required to pay your reasonable attorney fees.