As Soon As You File, You Are Protected

Bankruptcy Protection Starts Immediately

You are protected from the moment we file your papers with the Bankruptcy Court in nearly all cases. This protection is automatic and it is effective whether your creditors know about it or not. Many people fear that they will not be protected from their creditors right away, but even before your creditors receive the notice of the bankruptcy they are prohibited from taking collection actions against you.

The “automatic stay” protects you from collection efforts. The words “automatic stay” have a special meaning for people who deal with bankruptcy. They refer to Section 362 of the Bankruptcy Code, a law which is intended to stop all actions which would change the financial condition of anyone who files bankruptcy.

First of all, it is automatic, that is, its protection starts automatically without any need to go to court or get a court order or an injunction or anything other than starting your bankruptcy case.  There are a limited number of situations where an individual who files more than one bankruptcy case will not automatically be entitled to stay protection in the next one.  This can occur when a person files a third bankruptcy case within a year of the first two cases being dismissed by the court, or when a judge in a previous bankruptcy case ordered that if another case were filed by the same person there would not be an automatic stay in the new case, but these type of problems are rare and if you have not filed any prior bankruptcy cases they won’t apply to you.

The word “stay” sounds strange when used this way. We usually think of the word “stay” as a verb, like an instruction to a child to “stay” in the house, but in the term “the automatic stay,” the word “stay” is used as a noun. Historically, a “the stay of an action” was meant the stopping or freezing in place of something which would otherwise keep going, and a “stay of collection” of a debt was a normal term for stopping a debt collector from doing anything more to collect.

The words “automatic stay” combine to describe a law which prevents any actions to collect for almost anything that existed at the time you file your bankruptcy case, and to prevent any actions against your property during your bankruptcy case. There are some exceptions.

The automatic stay does not protect against certain events. Some examples include:

  • criminal prosecution
  • family support collection
  • tax audits or assessments