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Chapter 13 Bankruptcy Automatic Stay

Whenever a bankruptcy case is filed in a court (it can be under any chapter of the Bankruptcy Code) the automatic stay starts.

The automatic stay helps the debtor to protect his money or property from the creditor. Ones the case goes to the bankruptcy court all the lawsuits need to stop. A creditor is then prohibited to claim any property or money from the debtor until and unless the decision is made by the court. According to the chapter 13 bankruptcy the creditor is not even allowed to even ask money from the co debtor. The creditor or any third party trying to recover debt from the debtor is not allowed to make phone calls regarding the payment or have letter law suits. In fact, if knowingly they do, it is called contempt of court and they can be punished or fined for that.

The most important benefit that a debtor has is that if any property (like repossessed machinery, autos, money, tools, bank accounts or anything else) is ceased by the creditor then it has to be returned to the debtor.

However, if there are any criminal prosecutions against the debtor (in case he has violated any motor vehicle or criminal law) then that prosecution doesn’t stop in case of automatic stay. It doesn’t even effect the proceedings of alimony, child support or any divorce filings. It will not stop any tax audit proceeding as well.

The main purpose of the automatic stay is to give time and space to a debtor to decide what kind of plan they want. They can either opt for chapters 13, 7 or 11 of the U.S. bankruptcy code. In case of chapter 13 and 11 they need to decide in what way they will sort out their repayments.

The automatic stay generally remains effective until a debtor gets a discharge or a judge feels it is right to lift the stay on request of the creditor under certain circumstances or if the item of the property is not any longer the property owned by the estate.

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