Q What is an 'automatic stay' in bankruptcy?
An 'automatic stay' is a term used in bankruptcy proceedings that refers to a suspension in debt collection. An automatic stay is not permanent and it does not apply to all creditors. This process might help mitigate judgments, credit card debt, and some other areas of debt.
For creditors and collection parties where the automatic stay applies, it requires them to immediately cease debt collection activities. Even if you have not filed for bankruptcy, debt collectors must comply with federal laws like the Fair Debt Collection Practices Act. Bankruptcy attorney Brent Adams explains more about acceptable and non-acceptable collection actions in the video above.
An automatic stay occurs as soon as bankruptcy is filed. Of course, applying for bankruptcy and filing for bankruptcy are two separate things that do not occur immediately after the other. Also, the creditor might have the option to file a motion to 'lift the stay.' If this occurs, they can proceed with collection activities.