When you file bankruptcy, an automatic bankruptcy stay goes into effect by operation of law. The bankruptcy stay, also called the "automatic stay," stops lawsuits, foreclosure of your home, judgment collection, and most other types of adverse creditor action against you and your property. There are exceptions. An experienced bankruptcy lawyer can explain whether any exceptions apply to your situation.
What Types of Acts Will the Bankruptcy Stay Stop?
The bankruptcy stay will usually automatically stop the following acts against you or your property:
- Stop harassing calls from creditors and debt collectors.
- Stop foreclosure of your home dead in its tracks!
- Stop credit card collection lawsuits and most other types of lawsuits.
- Stop a threatened repossession of your car or other type of vehicle.
- Stop most other types of creditor action.
These are just a few examples of creditors' collection efforts that are stopped by the stay. In most cases, you will find that filing bankruptcy stops all creditor actions against you and your property. The automatic stay is so powerful and instantaneous that it can stop a foreclosure of your home even on the eve of the scheduled foreclosure sale date, or it can stop a pending lawsuit against you on the eve of the trial date.
Exceptions to Stay
There are exceptions to the stay, such as serial filings (if you have filed more than one case in the last year), an eviction lawsuit where the landlord has already obtained a judgment, a prior court order prohibiting you from filing for a stated period, or a prior court order allowing a property foreclosure to go forward. If an exception applies, the stay will not protect you. So it is important to discuss the applicability of the stay with your attorney.
Landlord Has Judgment
If your landlord already has a judgment against you and you file bankruptcy, you can still stop the eviction if you have valid grounds to contest the eviction and you deposit one month's rent with the court at the time that your case is filed. For most tenants who are in financial trouble, this remedy does not make practical or economic sense because if they had the money to deposit one month's rent with the Court then they probably would not have fallen so far behind on rent and be facing an eviction.
Chapter 13 Co-Debtor Stay
Chapter 13 has a special type of stay called a co-debtor stay, that can act as a stay for your non-filing spouse and protects your spouse even if only you file for bankruptcy. The co-debtor stay generally protects your non-filing spouse with respect to debts that both you and your spouse at to debts for which you are both jointly liable.