What Is The Automatic Stay in Bankruptcy?

The “automatic stay” comes into effect when the debtor files the┬ácase with the Court. The bankruptcy court will mail a notice to the creditors who are then prevented from any further collection activity against the debtor outside of bankruptcy court. The automatic stay stops lawsuits and garnishments in state courts. The automatic stay requires the creditors to appear in bankruptcy court if they feel they are entitled to be paid monies, and this greatly assists the debtor because he or she can therefore deal with all of the creditors in an orderly fashion under the Bankruptcy Code. The automatic stay even temporarily stops collection on most non-dischargeable debts, like taxes. This “breathing space” can be very useful to debtors in many different situations.