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.

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  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 >>
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    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 >>
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