Automatic Stay
The automatic stay is a very important part of bankruptcy protection. When you are overwhelmed with the consequences of mounting debt, the automatic stay stops everything. During this time you can formulate a plan and make more controlled decisions about your property and your future.
The legislative history states the following:
The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.”
Co-Debtor Stay
In Chapter 13 there is also a limited automatic stay that protects your co-debtor if the debt is a consumer debt and your co-debtor is an individual. The co-debtor cannot be an organization or a professional surety.
Creditor Actions
Creditors may seek to lift the automatic stay on them if:
- A creditor asserts that its property interest (a lien) is not “adequately protected”. This claim will not succeed if your plan provides that the creditor will receive a disbursement of pre-confirmation payments that you pay the trustee during your plan confirmation process.
- The creditor was in the middle of an action against your property (such as a foreclosure) when you filed your petition and it seeks to complete the action. To receive permission from the court to complete the action, the creditor must prove that you do not have any equity in the property that it seeks to seize or foreclose. If it proves that you do not but you want to keep the property, you must prove that you need the property for your reorganization plan (Chapter 13 or Chapter 11) to be effective.