The purpose of the automatic stay is to protect the debtor and her property from creditors and to give the debtor some breathing room to work out a repayment plan. In essence, the automatic stay freezes the debtor’s assets so that individual creditors cannot pick away at them and, in the process, destroy the debtor’s attempt at a fresh start.
In a Chapter 7 case, the automatic stay protects the debtor’s property and any equity he may have in that property so that the debtor can claim it as exempt and, thus, get the fresh start bankruptcy was meant to provide. Moreover, the automatic stay also ensures that non-exempt property is distributed fairly among unsecured creditors.
As it relates to a Chapter 13 case, the automatic stay ensures protection of the debtor’s property which may be necessary for a fresh start and which may be critical to the success of the debtor’s Chapter 13 plan. The automatic stay also prevents creditors from making collection efforts against a co-borrower of any debtor. Sometimes referred to as the “co-debtor stay”, it protects non-filing co-borrowers in the same way it protects the debtor.