In United States

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the deb ...

law, an automatic stay is an automatic

injunction An injunction is an equitable remedy in the form of a special court order compelling a party to do or refrain from doing certain acts. It was developed by the English courts of equity but its origins go back to Roman law and the equitable rem ...

that halts actions by

creditor A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some propert ...

s, with certain exceptions, to collect debts from a debtor who has declared bankruptcy. Under section 362 of the United States Bankruptcy Code, the stay begins at the moment the bankruptcy petition is filed. Secured creditors may, however, petition the bankruptcy court for relief from the automatic stay upon a showing of cause.

Provisions

A filed bankruptcy petition immediately operates as an automatic stay, holding in abeyance various forms of creditor action against the debtor. Automatic stay provisions work to protect the debtor against certain actions from the creditor, including: * beginning or continuing judicial proceedings against the debtor * actions to obtain debtor's property * actions to create, perfect or enforce a

lien A lien ( or ) is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the ''lienee'' and the pers ...

against a debtor's property * set-off of indebtedness owed to the debtor before commencement of the bankruptcy proceeding. A court may give a creditor relief from the stay if the creditor can show that the stay does not give the creditor "adequate protection" or if it jeopardizes the creditor's

interest In finance and economics, interest is payment from a debtor or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct f ...

in certain property. The court may give relief to the creditor in the form of periodic cash payments or an additional or replacement lien on the property. Concerned that debtors may exploit some of the advantages of automatic stay provisions, the

United States Congress The United States Congress is the legislature, legislative branch of the federal government of the United States. It is a Bicameralism, bicameral legislature, including a Lower house, lower body, the United States House of Representatives, ...

in 1994 provided some relief to certain creditors, such as creditors having a secured interest in a single real estate asset. Congress required that debtors in this situation either file a plan that has a reasonable chance of being accepted within a reasonable amount of time, or make monthly payments to each such secured creditor in the amount equal to interest at a current fair market rate on the value of the creditor's real estate. In 2005, Congress added two more exceptions to the automatic stay provisions. These exceptions concern landlords seeking to evict tenants. First, any eviction proceedings in which the landlord obtained a judgment of possession ''prior'' to the filing of the bankruptcy petition may be continued. Second, eviction proceedings filed after bankruptcy proceedings are exempt if the proceeding involves evicting the tenant on the basis of using illegal substances or "endangerment" of the property. Pursuant to the new provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act, certain restrictions were added t
section 362
If the debtor had a case dismissed in a case pending during the year before the bankruptcy case was filed, the automatic stay will expire as to the debtor and possibly as to the estate unless the debtor obtains an order extending it within 30 days. If the debtor had two cases pending in the year prior to filing, the automatic stay does not go into effect unless the debtor files a motion.

References

{{reflist United States bankruptcy law