Automatic Stay

AAA

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.

INVESTOPEDIA EXPLAINS '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. Voluntary Bankruptcy

    A type of bankruptcy where an insolvent debtor brings the petition ...
  2. Discharge In Bankruptcy

    A permanent order that releases the debtor from personal liability ...
  3. Bankruptcy Financing

    Financing arranged by a company while under the chapter 11 bankruptcy ...
  4. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  5. Chapter 11

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

    The possibility that a company will be unable to meet its debt ...
Related Articles
  1. How do I file a proof of claim against ...
    Personal Finance

    How do I file a proof of claim against ...

  2. How often can I file bankruptcy?
    Credit & Loans

    How often can I file bankruptcy?

  3. How are my cosigners affected if I file ...
    Credit & Loans

    How are my cosigners affected if I file ...

  4. How To Calculate A Z-Score
    Markets

    How To Calculate A Z-Score

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center