Automatic Stay

DEFINITION of 'Automatic Stay'

A legal provision that temporarily prevents creditors from pursuing debtors for amounts owed. An automatic stay goes into effect immediately when a debtor files for bankruptcy. Creditors who believe they have sufficient grounds can petition the court to lift the automatic stay so they can continue the collection process. A bankruptcy filing in bad faith will not create an automatic stay. Also, certain debts, such as child support, are not stayed.

BREAKING DOWN 'Automatic Stay'

Once an automatic stay is in effect, creditors are unlikely to receive the full amounts they are owed. Instead, they will receive a proportional share of the bankrupt debtor's limited assets. A debtor may sue a creditor who continues to contact them or who attempts to sue them after an automatic stay is in place.

RELATED TERMS
  1. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  2. Voluntary Bankruptcy

    A type of bankruptcy where an insolvent debtor brings the petition ...
  3. Creditor

    An entity (person or institution) that extends credit by giving ...
  4. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  5. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  6. Technical Bankruptcy

    The state of a company or person who has defaulted on a financial ...
Related Articles
  1. Markets

    How To Calculate A Z-Score

    Investors need to know how to detect signs of looming bankruptcy. The Z-score can help.
  2. Retirement

    Bankruptcy Protection For Your Accounts

    Will the plan assets you've worked hard for be safe if you experience a personal financial crisis?
  3. Insurance

    Declaring Bankruptcy Is No Easy Out

    Going bankrupt can help pull you out of debt, but it's rarely the best option.
  4. Insurance

    Life After Bankruptcy

    Find out what you have to look forward to after filing for Chapter 7 or 13.
  5. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  6. Options & Futures

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  7. Retirement

    What You Need To Know About Bankruptcy

    Don't choose this last-resort option until you learn how it will affect your future.
  8. Economics

    Lehman Brothers: The Largest Bankruptcy Filing Ever

    Lehman Brothers survived several crises, but the collapse of the U.S. housing market brought the company to its knees.
  9. Economics

    Why Enron Collapsed

    Enron’s collapse is a classic example of greed gone wrong.
  10. Credit & Loans

    Top 5 Reasons Why People Go Bankrupt

    The biggest cause of bankruptcy in the United States is medical expenses.
RELATED FAQS
  1. Can I file for bankruptcy more than once?

    Filing bankruptcy is never a simple decision, but sometimes it is the best thing you can do in your current financial situation. ... Read Full Answer >>
  2. What are the differences between Chapter 7 and Chapter 13 bankruptcy?

    In the United States, the most common kinds of personal bankruptcy filings are under Chapter 7 or Chapter 13 proceedings. ... Read Full Answer >>
  3. How do I file a proof of claim against someone who has filed bankruptcy?

    When someone who owes you money has filed bankruptcy, and you have been listed as a creditor in the filing, you are legally ... Read Full Answer >>
  4. How are my cosigners affected if I file bankruptcy?

    Cosigners assume the responsibility to pay for another individual's debt in the event of a default, and that responsibility ... Read Full Answer >>
  5. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Full Answer >>
  6. Can personal loans be included in bankruptcy?

    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
Hot Definitions
  1. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  2. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  4. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
  5. Godfather Offer

    An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium ...
Trading Center