In many respects, the automatic stay functions as the most important protection provided in a bankruptcy filing.  Set out at Section 362 of the United States Bankruptcy Code, the automatic stay provision states that the minute a bankruptcy case is filed, you are protected from:

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;

(8) the commencement or continuation of a proceeding before the United States Tax Court concerning a corporate debtor’s tax liability for a taxable period the bankruptcy court may determine or concerning the tax liability of a debtor who is an individual for a taxable period ending before the date of the order for relief under this title.

In other words, just about any collection action that would benefit a creditor is prohibited by the automatic stay.  Bankruptcy judges take the automatic stay very seriously as well.  If a creditor intentionally violates the automatic stay, that creditor can be subject to sanctions and monetary damages.

The automatic stay goes into effect the instant we file your bankruptcy case. Official notice is mailed out by the clerk of court within a week or so of filing, but creditors are still subject to the stay even before they are given formal notice of your case filing. Therefore, once you have your case number, you should provide that number to any creditor who is dunning you for payment and that creditor should immediately discontinue communication. Of course, if your creditor refuses to respect the automatic stay, you should let your Clark & Washington lawyer know immediately.

Exceptions to the Automatic Stay

While the automatic stay remains extremely powerful, its reach is not without limitation. In fact, Congress regularly tinkers with the automatic stay, usually to remove certain types of debt from its reach. For example, Section 362(b) now excludes from the automatic stay legal actions to enforce child support payments, the interception of a tax return by the IRS or State department of revenue, driver’s license suspension actions, and several other matters which you can review by clicking on the above link.