Automatic Stay
What does "Automatic Stay" mean in law?
The automatic stay, codified at 11 U.S.C. section 362, is an injunction that takes effect immediately upon the filing of a bankruptcy petition and halts virtually all collection actions, lawsuits, foreclosures, garnishments, and repossessions against the debtor and property of the estate. It serves the dual purpose of giving the debtor breathing room and ensuring equitable treatment of creditors by preventing a race to the courthouse. Creditors may seek relief from the automatic stay by filing a motion under section 362(d), typically by showing cause such as lack of adequate protection of their interest in collateral. Willful violations of the stay can result in sanctions, including actual damages and attorneys' fees.
Definition
The automatic stay, codified at 11 U.S.C. section 362, is an injunction that takes effect immediately upon the filing of a bankruptcy petition and halts virtually all collection actions, lawsuits, foreclosures, garnishments, and repossessions against the debtor and property of the estate. It serves the dual purpose of giving the debtor breathing room and ensuring equitable treatment of creditors by preventing a race to the courthouse. Creditors may seek relief from the automatic stay by filing a motion under section 362(d), typically by showing cause such as lack of adequate protection of their interest in collateral. Willful violations of the stay can result in sanctions, including actual damages and attorneys' fees.
Example
When a debtor filed her bankruptcy petition, the automatic stay immediately prohibited her mortgage lender from proceeding with a scheduled foreclosure sale the following day.