What is the Automatic Stay in Bankruptcy in California?

What is the Automatic Stay in Bankruptcy in California?

The automatic stay is one of the fundamental protections provided by bankruptcy law in the United States. Here are some key points about the automatic stay:

– It goes into effect immediately when someone files for bankruptcy, regardless of whether the debtor files Chapter 7, Chapter 13, or Chapter 11.

– It stops all collection activities against the debtor, at least temporarily. This includes lawsuits, foreclosures, wage garnishments, debt collection calls, repossessions, utility shut-offs, and more.

– The stay provides the debtor with breathing room from creditors while the bankruptcy process unfolds. This allows the debtor time to reorganize finances or liquidate assets in an orderly fashion.

– Creditors must seek relief from the automatic stay from the bankruptcy court if they want to resume collection activities against the debtor. This usually requires filing a motion with the court.

– If a creditor knowingly violates the automatic stay, the judge may cite them for contempt of court and impose sanctions such as monetary damages payable to the debtor.

– In Chapter 7 and Chapter 13 bankruptcies, the stay is usually in effect until assets are liquidated or debts are discharged. In Chapter 11 reorganization, it may last the duration of the restructuring process.

– The stay only halts actions against the debtor – creditors can still pursue co-signers or guarantors for payment of a debt.

– Certain recurring payments like child support, alimony, taxes, and student loans are not subject to the automatic stay.

So in summary, the automatic stay gives the debtor immediate temporary relief from all collection activities and allows due process under the law to play out. Creditors must get court approval to lift the stay for their particular claim.