The Automatic Stay
Once a bankruptcy case is filed, the "Automatic Stay" provision of bankruptcy law comes into effect. The purpose of the "Stay" is to stop all creditor collection activities, such as garnishments, lawsuits, phone calls, letters, etc. Violating the stay is a federal offense and allows the debtor to sue the creditor and obtain a judgment for damages from the creditor. The stay applies to all creditor collection activity, no matter how insignificant it may appear. Creditors can no longer even send a letter that appears to be a collection activity without possibly violating the stay. Once the stay is in place, a creditor must obtain permission from the court in order to continue any collection activity. Creditors wanting to continue foreclosure actions against debtors in Chapter 7 are one of the more frequent situations where creditors requesting such permission from the court are routinely granted by the court.