 |
|||||||||||||
 |
|||||||||||||
|
What is an Automatic Stay in Bankruptcy?An automatic stay is a restriction that stops certain actions by creditors to collect debts from an individual or entity who has filed for bankruptcy. The automatic stay is effective the instant a bankruptcy petition is filed. The Automatic Stay prohibits creditors from starting new lawsuits or continuing existing lawsuits. In addition a creditor is prohibited from repossessing property or garnishing the debtors wages. Once the debtor has filed for bankruptcy a creditor may not initiate or continue legal proceedings related to the debt owed. The automatic stay is not permanent, a judge may lift a stay for a number of reasons including a bankruptcy discharge or property that is not owned by the estate. Even though the automatic stay temporarily protects the debtor after they have filed for bankruptcy, in the case of a secured loan, the creditor may be able to enforce actions against the debtor. The secured loan gives the creditor privileged rights in the disposition of the assets that were secured by the loan. The description above is not a comprehensive legal definition but rather an informal description of the term and how it may be used in a case involving bankruptcy.
|
||||||||||||
| |||||||||||||
