The automatic stay is likely a Debtor’s strongest asset and strongest line of defense in the Bankruptcy structure. Invoked upon the filing of a Bankruptcy petition, the automatic stay stops all continued and future creditor actions so long as the stay is in place.
In efforts to better understand the stay, a law professor of mine would tell us to think of the automatic stay as the closing of the castle’s iron gate moments before entry of unwanted guests, essentially stopping them in their tracks. This means any pending foreclosure proceedings and foreclosure sales, evictions, acts of repossession, wage garnishments, collection letters, and even threats of future actions must stop at the moment the stay comes into effect.
In the perfect world, the law surrounding the automatic stay would preclude any and all creditor actions from a violation. However, inevitable violations of the automatic stay will occur from time to time. Most common concerns would be a creditor’s lack of notice of the bankruptcy petition. Luckily, such actions can usually be cured within short time by returning a Debtor to their status quo. In other instances, where notice had been properly made, some creditor’s may continue with their violating efforts which tend to promulgate new concerns where additional motions and other legal ramifications are likely to take place (ie. Motions for Contempt and Sanctions). Nonetheless, the strength of the automatic stay remains aligned with the Debtor’s interests and should prevail over continued creditor actions.
Although the automatic stay operates and is in effect with respect to most creditor actions, certain continued acts are not stayed and remain fair game so to speak. Amongst these exceptions are the following: criminal actions and proceedings and other civil actions mostly involving domestic support obligations as well as other family law concerns. With respect to these items, the filing of the bankruptcy petition will not invoke the protections of the automatic stay and such continued acts will not be seen as a violation of the automatic stay.
All in all, the automatic stay remains one of the strongest legal protections for a Debtor in dealing with creditor actions. Should you find yourself in a tight spot and backed into a corner due to financial hardship, invoking the automatic stay can provide the light at the end of the tunnel and allow you to overcome those concerns.