When Does Bankruptcy’s Automatic Stay Take Effect?

Deciding to file for bankruptcy is a major decision. This decision can feel overwhelming. However, bankruptcy offers essential protection for individuals and businesses facing financial hardships. One of the protections bankruptcy offers is the automatic stay. After the automatic stay goes into effect, not only are creditors required to stop contacting the filer, but they are also required to stop collecting payments or threatening to sue. If you are considering filing for bankruptcy, you might be wondering when the automatic stay takes effect. So, when does bankruptcy’s automatic stay go into effect? Read on to find out the answer to this question.
Defining the Automatic Stay
After you file for bankruptcy, a court order called an “automatic stay” goes into effect. This is true regardless of whether you file for Chapter 7, Chapter 13, or Chapter 11 bankruptcy. The automatic stay bars creditors from contacting you and engaging in collection activities, such as lawsuits, wage garnishments, or foreclosures. The automatic stay is meant to provide individuals and businesses filing for bankruptcy with relief and time to reorganize or discharge their debts under the bankruptcy process.
However, it is vital to note that the automatic stay is not a permanent solution.
When Does the Stay Take Effect?
The automatic stay takes effect immediately after you file your bankruptcy petition. This is true regardless of whether you file for Chapter 7, Chapter 13, or Chapter 11 bankruptcy and whether your filing is done electronically, in person, or by mail. This court order is automatically enacted immediately after the court receives your paperwork. Once the paperwork is filed, your creditors will be notified of the stay, and they will be legally obligated to stop all collection activities.
The immediacy of the automatic stay is a key advantage of filing for bankruptcy. The automatic stay can offer significant relief to individuals and businesses dealing with aggressive creditors. Even if a creditor is about to proceed with repossession, a lawsuit, or foreclosure, the automatic stay prevents them from continuing to take these actions. A creditor who knowingly violates the automatic stay can face legal penalties, including damages and fines.
How Do Creditors Find Out About the Automatic Stay?
After you file for bankruptcy, the court will notify all listed creditors of the stay and your case. It is vital that you provide a list of all your creditors and their addresses to the court so the court can send them the notice. The notice tells your creditors to stop all collection efforts against you. However, if a creditor continues collection efforts after the bankruptcy petition is filed but before they receive notice, you or your attorney can inform them about the filing.
How Long Does the Automatic Stay Last?
While the relief provided by the automatic stay is immediate, it is not indefinite. Often, the stay remains in effect until the case is dismissed or closed, a discharge is granted, or a creditor successfully petitions the court to lift the stay.
Contact Us for Legal Help
For help navigating the complex bankruptcy process, contact our Deerfield Beach bankruptcy lawyer at the Law Office of Adam I. Skolnik, P.A., at 561-265-1120.