It is also the part people misunderstand most. The stay is powerful, but it has limits, and a few of them catch people off guard. Here is how it works in plain terms.
What the automatic stay is
The automatic stay comes from federal bankruptcy law. When a bankruptcy petition is filed, the law orders creditors to stop trying to collect on debts that existed before the filing. Nobody has to ask a judge for it and nobody has to approve it. The word "automatic" is literal.
It applies in Chapter 7 and in Chapter 13. It lasts while the case is open, unless the court lifts it for a particular creditor or one of the exceptions below applies. For most debts, it ends when the case ends with a discharge, and by then the debt it was protecting you from is usually gone.
What it stops
For most of the people who come in to see us, the stay covers the things that brought them in.
Wage garnishment. A garnishment on an ordinary consumer debt has to stop. This is usually the fastest relief bankruptcy offers, because the money starts staying in your paycheck again.
Collection calls and letters. Creditors and collectors cannot keep contacting you to collect a debt that is part of the case.
Lawsuits. A collection lawsuit that is already filed is put on hold, and new ones cannot be started.
Foreclosure. A scheduled foreclosure sale cannot go forward while the stay is in place. What happens after that depends on the chapter. Chapter 7 can buy time. Chapter 13 lets you catch up on the missed mortgage payments over a three to five year plan and keep the house.
Repossession. A lender cannot take your car while the stay is in effect. Chapter 13 works the same way here, letting you catch up on the loan instead of losing the vehicle.
Utility shutoffs. A utility company cannot cut your service just because you filed or because of an unpaid bill from before the filing. It can ask for a deposit, though, and if you don't provide one or some other assurance of payment within 20 days of filing, it can shut the service off.
What it doesn't stop
This is where people get surprised, so it is worth knowing before you file.
Child support and alimony keep going. The stay does not stop the collection of support obligations, and a support order can still be set or changed while your case is open.
Criminal cases continue. If you have a criminal case, including one where restitution is owed, bankruptcy does not pause it.
Some evictions are not stopped. If your landlord already has a judgment for possession before you file, the eviction can usually go forward.
And a creditor can ask the court for permission to proceed. This is called a motion for relief from the stay. It comes up most often when someone is behind on a house or a car and is not paying for it going forward. It is not automatic, and it is something we look at with you before the case is filed.
If you have filed before
A prior bankruptcy changes the rules. If you had a case dismissed within the past year and you file again, the stay generally lasts only 30 days unless the court agrees to extend it. With two or more cases dismissed in the past year, there may be no automatic stay at all without a court order.
None of that makes filing again impossible. It means the timing and the paperwork matter more. Tell us about any earlier case at the first meeting, even one that was filed somewhere else or years ago.
Protection for a cosigner in Chapter 13
People often put off filing because someone else signed on a loan with them. A parent who cosigned a car note. A spouse on a credit card. They don't want that person to get the calls instead.
Chapter 13 has a separate protection for this, sometimes called the co-debtor stay. On most consumer debts, it keeps creditors from going after the cosigner while your plan is in place. Chapter 7 does not have that protection, so this can be one of the things that decides which chapter fits.
When the stay actually starts working
Legally, the stay begins the moment the case is filed. In practice, it works once the creditor and, for a garnishment, your employer know about it. The court sends notice to the creditors you list, but that takes time, so the most urgent ones should hear about it directly and quickly.
So bring the paperwork with you: the garnishment notice, any foreclosure or lawsuit papers, and the names of the creditors who are calling. The right people can then be notified quickly once the case is filed.
Talk to us before another payday goes by
We have handled thousands of bankruptcy cases across Central Arkansas. Lonnie Grimes and our bankruptcy team will look at what you owe, what you earn and what you own, and tell you plainly which chapter fits. Sometimes the honest answer is that you don't need to file at all.
The consultation is free. We answer our phones.
You can read more about how we handle Chapter 7 and Chapter 13 bankruptcy.
This article is general information about bankruptcy law, not legal advice about your situation, and reading it does not create an attorney-client relationship. The automatic stay has exceptions that depend on your facts. Talk to a lawyer about your own situation before acting.