When a resident of Washington County or other communities on the Olympic Peninsula considers bankruptcy, they are often motivated by the idea that a bankruptcy proceeding will protect them from their creditors. However, very few potential bankruptcy petitioners understand just how this protection is provided. The answer is the “automatic stay,” and an understanding of the basic provisions of automatic stay is essential in deciding whether and how to file a bankruptcy petition.
The basic workings of the automatic stay
A stay is a court order that prevents a party to a legal proceeding from taking certain actions that are described in the order. In bankruptcy, the automatic stay is an order issued automatically by the clerk of bankruptcy court to all creditors identified in the petition. The stay prevents all creditors from taking action to collect debts that were owed as of the date of filing of the petition. As long as the stay is in effect, all of the petitioner’s creditors are barred from taking any action to collect on an existing debt. The stay applies to law suits, actions to foreclose mortgages, collection letters and telephone calls, actions to foreclose liens on the debtor’s property, and garnishing the debtor’s wages. The stay may be limited to 30 days in some cases or longer if the debtor asks the court to extend it. A creditor may likewise ask the court to lift the stay or reduce the length of its effect period.
Actions not covered by the stay
The automatic stay does not stay certain actions that are specified in the statute. These actions may include actions to enforce a domestic support order, establishment of paternity, divorce.
Anyone who is considering filing a bankruptcy petition should consult an experienced bankruptcy attorney for advice on how the automatic stay will apply to the debtor’s situation. A capable bankruptcy attorney can determine if any of the exceptions to the operation of the stay will affect the debtor and whether any debts are beyond the reach of the stay.