The automatic stay temporarily halts most judgments, collection activities, foreclosures and repossessions of the consumer’s property, which is known as the bankruptcy estate. There are some limits and exceptions, though.
What the automatic stay covers
As long as the debt or dispute was incurred before filing for bankruptcy, the automatic stay will typically suspend:
But an automatic stay doesn’t apply to some things, such as child and domestic support orders, some tax obligations and criminal penalties.
How long does the automatic stay last?
The automatic stay typically lasts until a bankruptcy case is closed or dismissed, or until a discharge is granted — meaning the debt is forgiven — or a discharge is denied.
Also, the bankruptcy judge may lift a stay at the request of a creditor that files a motion for relief (more on that in the next section) or if a particular item is no longer part of the bankruptcy estate.
But under some circumstances the stay lasts a shorter time or doesn’t apply at all:
If you file for bankruptcy within one year of a previous bankruptcy dismissal, then the automatic stay lasts just 30 days.
If you’re filing a third time in one year, no automatic stay is granted.
If you think your repeat bankruptcy filings are in good faith and have evidence to support it, you can file a motion with the court asking to grant the automatic stay or extend it. It’s best to seek legal counsel whenever filing a motion to make sure it’s done correctly and to give yourself the best chance for a favorable outcome.
How to fight a motion for relief from the automatic stay
When a creditor still wants to collect despite the automatic stay, it must file a motion with the court to lift the stay. This action is most often done by creditors of secured debt, or debt that is backed by collateral, like a home or car.
The creditor must give you proper notice and a hearing. The creditor is responsible for proving to the bankruptcy court there’s a valid reason why the stay should be lifted.
Fighting a creditor’s motion for relief can be complicated; the best option is to let your attorney handle it or find a bankruptcy attorney if you aren’t already working with one. You want to make sure the proper paperwork is filed and deadlines are met.
If a creditor is successful and the court grants the motion to lift the stay, that creditor can resume collection efforts against you immediately.
What should you do if a creditor ignores the automatic stay?
If you’re still being contacted, make sure the creditor knows that you’ve filed for bankruptcy. Also, check that the debt is in your list of debts and creditors filed with the bankruptcy court and that it’s covered by the automatic stay.
The Consumer Financial Protection Bureau advises that you document all correspondence with creditors. If you’re represented by an attorney, creditors can’t contact you and must instead communicate with your attorney.
If a creditor still persists with collection efforts, you or your attorney should notify the bankruptcy court. If the court finds that the collector has violated the automatic stay order, the court can make it pay damages, fines or attorney fees.