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Bankruptcy

automatic stays

The automatic stay provides a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. A stay of creditor actions against the debtor automatically goes into effect when the bankruptcy petition is filed. The stay provides a breathing spell for the debtor, during which negotiations can take place to try to resolve the difficulties in the debtor's financial situation.

In Alabama, as in all states across the United States, the automatic stay is a fundamental provision of the federal Bankruptcy Code (11 U.S.C. § 362). When a debtor files for bankruptcy, the automatic stay immediately takes effect, halting most creditors from continuing with collection actions, including lawsuits, wage garnishments, or even contacting the debtor to demand payment. This stay applies to actions related to debts that were incurred before the filing of the bankruptcy petition. The automatic stay is designed to provide a 'breathing spell' for the debtor, during which time the debtor's assets are protected while they work with an attorney to reorganize their finances or liquidate assets under court supervision. Creditors are prohibited from taking any action to collect debts without first obtaining permission from the bankruptcy court, which may grant relief from the stay if the creditor can show cause.

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Bankruptcy

automatic stays

Individual & Family Legal Plan

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Alabama State Code

Alabama State Code

Bankruptcy

automatic stays

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