Purpose of the Automatic Stay

The automatic stay is an essential component of bankruptcy. The goals are the debtor’s fresh start and the creditor’s fair treatment. By stopping individual collection activity by creditors, the automatic stay prevents the reduction of the debtor’s assets and saves them to be surrendered to the trustee for equal dismemberment. The stay applies to all forms of bankruptcy, likely to vary by the type of bankruptcy relief sought.

Stops Creditors Actions

Once a debtor files bankruptcy, a creditor can no longer seek advantage by continuing with payment reinforcement activity. The creditors are to direct their claims through the bankruptcy court. By stopping all collection activity, the creditor body as a whole is benefited by preserving the estate for even distribution.

In some situations, if a creditor can show grounds that the automatic stay will impede its efforts to collect on a debt, the court may lift the stay and allow the continuation of the enforcement process.

Immediate Relief From Calls

The automatic stay goes into effect as soon as the bankruptcy petition is filed, and stays in effect until the case is either completed or dismissed. The stay gives the debtors relief from creditor pressure tactics of phone calls, mail or threats of legal action.

Bankruptcy Court

The automatic stay is essential to the bankruptcy court’s ability to deal effectively with the case and any litigation associated with the debt. By stopping all other court proceedings, it allows the bankruptcy court to exercise its jurisdiction and assume the central role over the debtor’s property and the property of the estate.

All litigation associated with the case must be brought before the bankruptcy court and will be resolved there unless the court permits the proceedings to continue elsewhere by abstaining or granting relief from the stay. The stay does not determine the validity of the claims or dispose of them. It merely suspends the action until it can be handled in the bankruptcy case.

If you have more questions about how the automatic stay works or how you could obtain relief from creditors actions contact a Dallas bankruptcy attorney today.