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 New Mexico, 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 purpose of the automatic stay is to provide a 'breathing spell' for the debtor, allowing them time to reorganize their finances without the pressure of creditor actions. It also ensures that all creditors are treated fairly by preventing one creditor from pursuing its own remedy against the debtor's property to the detriment of other creditors. Creditors can, in some cases, ask the bankruptcy court to lift the stay if they believe it's not serving its intended purpose or if they can show that their interest in a particular asset is at risk.