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The Automatic Stay Stops Your Creditors The Moment You File Bankruptcy

Categories: Automatic Stay, Chapter 13, Chapter 7

It seems rather simple to say that the moment your bankruptcy case is filed, this protective shield comes up to protect you from your creditors.  Technically, the Automatic Stay, found in 11 U.S.C. §362 is an injunction that arises by operation of law, hence the “automatic” part. It acts like a Super Hero to protect you from your creditors. 

What’s great about the Automatic Stay is that it is binding on all entitites as defined in §101(15).  It comes into effect upon the filing of the bankruptcy case and generally will stay in effect until the case is closed or dismissed.  The Stay also applies in all forms of bankruptcy whether you file under Chapter 7, 11, or 13.

Don’t worry if your creditors have not received notice of your bankruptcy case because its effectiveness does not depend on a creditor’s notice of the filing.  The Automatic Stay will stop the following:

  1. foreclosure sale of real property belonging to thedebtor;
  2. wage garnishments;
  3. bank levies;
  4. Any activity against the debtor or the property of the debtor is included and protected; and
  5. property of the estate.

Unfortunately, the Automatic Stay does not protect against criminal actions or enforcement §365(b)(1); proceedings by governmental units to enforce a policy or regulatory powers §362(b)(4); specified creditor action to consolidate nonbankruptcy rights §362(b)(3); or family/child support oblibations §362(b)(2)

Photo Credit:  Demandaj

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