Automatic Stay

What does "automatic stay" mean?

The automatic stay is the halt on collection activity that a bankruptcy filing itself creates. Under 11 U.S.C. § 362(a), a petition filed under section 301, 302, or 303 "operates as a stay, applicable to all entities" of a listed set of acts. The word automatic is literal: no motion is filed, no hearing is held, and no judge signs an order. It takes effect on filing.

The listed acts are broad. They include commencing or continuing a lawsuit against the debtor that could have been brought before the case, enforcing a pre-petition judgment, acts to obtain or control property of the estate, creating or perfecting a lien, any act to collect a pre-petition claim, and setoff of a pre-petition debt.

Courts describe it in the same terms. As the Bankruptcy Court for the Central District of California puts it, the stay "applies at the moment a bankruptcy petition is filed."

Why does it matter in a bankruptcy case?

The stay is what makes an orderly bankruptcy case possible. Without it, whichever creditor moved fastest would take the most, and the case would be a race rather than a process. With it, claims are sorted inside one proceeding.

For a person filing, the practical effect is that collection pressure generally stops while the case is pending. Wage garnishments, bank levies, foreclosure sales, repossession, and collection calls on pre-petition debts all fall within the acts § 362(a) lists.

It is a pause, not an erasure. The stay does not cancel a debt, void a lien, or decide who ultimately gets paid — those questions are resolved elsewhere in the case. A mortgage or car loan survives the filing and remains enforceable against the collateral unless something else in the case changes it. And a creditor whose interest is losing value may be entitled to adequate protection under 11 U.S.C. § 361.

How does the stay work in practice?

Three limits shape how the stay actually operates.

First, § 362(b) lists acts the filing does not stay at all. A criminal action or proceeding against the debtor is not stayed. Neither are certain domestic-relations proceedings, including establishing paternity, establishing or modifying a domestic support obligation, and child custody or visitation matters.

Second, a creditor can ask the court to lift it. Under 11 U.S.C. § 362(d), a party in interest may request relief from the stay, and the court grants it on the grounds the statute sets out. These motions are usually titled a motion for relief from stay, and the court decides after notice and a hearing.

Third, the stay does not last forever. Under 11 U.S.C. § 362(c), it continues as to property of the estate until the property is no longer property of the estate, and as to an individual debtor until the case is closed or dismissed or the discharge is granted or denied.

What do people get wrong about it?

The most common error is treating the stay as automatic in every case regardless of history. Under 11 U.S.C. § 362(c)(3), in a case of an individual filed under chapter 7, 11, or 13 where a single or joint case of that debtor was pending within the preceding 1-year period and was dismissed — subject to the statutory exception for a case refiled under a chapter other than chapter 7 after dismissal under § 707(b) — the stay terminates with respect to the debtor on the 30th day after filing. Under § 362(c)(3)(B), a party in interest may move to extend it, and the hearing must be completed before the 30-day period expires, on a showing that the later case was filed in good faith.

A second error is assuming the stay reaches everything. It does not stay the § 362(b) exceptions, and it does not by itself resolve a lien.

A third is thinking it is discretionary. It is not requested; it arises by statute.

Frequently asked questions

Does anyone have to ask the court for the automatic stay?

No. Under 11 U.S.C. § 362(a), the petition itself operates as the stay. No motion is filed and no judge signs an order. The one situation where a debtor may need to ask the court is a repeat-filing case, where 11 U.S.C. § 362(c) limits the stay and a party in interest may move to extend or impose it.

Does the automatic stay stop a divorce or child support case?

Not in the respects § 362(b)(2) lists. The filing does not operate as a stay of a civil action or proceeding to establish paternity, to establish or modify an order for domestic support obligations, or concerning child custody or visitation. A marital dissolution proceeding is also excepted, except to the extent it seeks to determine certain matters the statute identifies.

Can a creditor get around the automatic stay?

A creditor cannot ignore it, but it can ask the court to lift it. Under 11 U.S.C. § 362(d), a party in interest may request relief from the stay, most often by a motion for relief from stay. The court rules after notice and a hearing. Local bankruptcy rules govern the forms, service, and hearing scheduling, and those vary by district.

Are co-signers covered by the automatic stay?

Not by § 362 itself. Chapters 12 and 13 contain a separate codebtor stay: under 11 U.S.C. §§ 1201(a) and 1301(a), after the order for relief a creditor generally may not act to collect a consumer debt of the debtor from an individual liable on that debt with the debtor, subject to the exceptions each section states. A creditor may request relief from that stay.

Sources

• 11 U.S.C. § 362 — Automatic stay · official source
• 11 U.S.C. § 361 — Adequate protection · official source
• 11 U.S.C. § 1301 — Stay of action against codebtor · official source
• 11 U.S.C. § 1201 — Stay of action against codebtor
• U.S. Bankr. Ct. C.D. Cal., Automatic Stay: § 362: OVERVIEW: Mandatory Forms: Filing Fees; Service
• Bankr. M.D. Fla. Procedure Manual — Motion for Relief from Stay and Motion for Relief from Co-Debtor Stay - Chapters 12 and 13

Related

• Bankruptcy glossary
• Statutes and rules library
• Bankruptcy estate
• Bank levy: what it means and how it works
• Build your personalised roadmap