When a person files a bankruptcy petition, that action immediately creates a federal court order that requires creditors to stop their collection efforts. This “automatic stay” prevents most creditors from calling, writing collection letters, garnishing paychecks, levying accounts, or seizing property – at least temporarily. The stay isn’t absolute; filing bankruptcy is a legal procedure, and as you’d expect from any legal procedure, there are multiple exceptions and state law variations. The automatic stay won’t prevent all actions against a debtor, and certain creditors may be able to get the bankruptcy court to lift the stay. And a debtor’s prior bankruptcy filings may either shorten the stay or completely prevent it from happening, if those cases were pending within the past year. Despite these limitations, though, the purpose of the automatic stay is a good one: to give the debtor a much-needed respite from the forces that led him or her to file for bankruptcy, and to ensure the orderly and equitable distribution of the bankruptcy estate. Without the automatic stay, creditors would be incentivized to act quickly and aggressively to collect on their debts.
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