Automatic stay protections: practical guide for borrowers

Filing for bankruptcy triggers a powerful, automatic protection called the automatic stay. This legal injunction stops most collection activity immediately, giving borrowers critical time to breathe, reorganize, or pursue a discharge or repayment plan. Below I explain how the stay works, who it covers, common exceptions, what to do if a creditor violates the stay, and practical next steps based on 15+ years advising clients on consumer bankruptcy.

Quick authority: The automatic stay is codified at 11 U.S.C. §362 and explained by the federal courts (U.S. Courts, “Automatic Stay”). See also CFPB guidance on debt collection during bankruptcy. (U.S. Courts: https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/automatic-stay; CFPB: https://www.consumerfinance.gov/)

What the automatic stay stops (and what it usually doesn’t)

The automatic stay generally prohibits creditors from continuing or starting most kinds of collection activity against the debtor or the debtor’s property. Examples of actions typically halted include:

  • Lawsuits and new collection litigation.
  • Wage garnishments and bank account levies (most garnishments stop once the petition is filed).
  • Repossession of vehicles or personal property without court permission.
  • Foreclosure sales and sheriff’s sales in many circumstances.
  • Phone calls, letters and other communications intended to collect a debt.

However, the stay is not absolute. Common exceptions and limits include:

  • Domestic support obligations (child support, alimony) and certain enforcement of those orders are generally not discharged and may be treated differently with respect to collection.
  • Some tax matters may be excepted or subject to specific rules; bankruptcy can stop many IRS collection actions, but priority or recent tax liabilities may survive (see When Bankruptcy Can Stop IRS Collection Actions).
  • Criminal proceedings and certain governmental actions unrelated to debt are not stayed.
  • A secured creditor can petition the bankruptcy court for relief from the stay to repossess or foreclose if they show lack of adequate protection or other grounds.
  • Repeat filings: If you filed and had a previous bankruptcy dismissed within the last year, the stay may be limited or not apply automatically under 11 U.S.C. §362(c)(3)–(4).

For further guidance on what debts are typically discharged and which survive bankruptcy, see our related piece: Bankruptcy and Loan Discharge: What Debts Usually Survive.

(Internal links: “When Bankruptcy Can Stop IRS Collection Actions”: https://finhelp.io/glossary/when-bankruptcy-can-stop-irs-collection-actions/; “Bankruptcy and Loan Discharge: What Debts Usually Survive”: https://finhelp.io/glossary/bankruptcy-and-loan-discharge-what-debts-usually-survive/)

How the stay starts, how long it lasts, and repeated filings

  • Start: The automatic stay takes effect the moment a bankruptcy petition (voluntary or involuntary) is filed with the bankruptcy court. That filing date is critical — collections must stop as of that date.
  • Duration: In a typical Chapter 7 case, the stay lasts until the court dismisses the case or until discharge and the case closes. In Chapter 13 it generally lasts for the length of the confirmed repayment plan (commonly 3–5 years) unless lifted by the court.
  • Refilings and limits: If a prior case was dismissed within the previous year, the automatic stay may be limited to 30 days or may not apply unless the debtor obtains a court order extending it (11 U.S.C. §362(c)(3)–(4)). This is an area where timely counsel matters.

Source: U.S. Courts (Automatic Stay) and statutory provisions at 11 U.S.C. §362.

What to do immediately when considering or filing for bankruptcy

  1. Retain a bankruptcy attorney or housing counselor if possible. I routinely see faster, cleaner outcomes when counsel files correctly and serves notice to creditors.
  2. Preserve documentation: statements showing garnishments, repossession notices, foreclosure sale dates, and creditor communications. These prove violations if a creditor keeps collecting.
  3. File the bankruptcy petition (Chapter 7 or 13) to trigger the stay — the protection is automatic on filing.
  4. Serve or ensure the court clerk/attorney sends notice to all creditors and the trustee.
  5. Keep a written log of any creditor contact after filing (dates, times, names, what was said).
  6. If a foreclosure sale, repossession, or garnishment is imminent, tell your attorney immediately — emergencies may require filing an emergency motion for temporary relief.

A practical timeline I use with clients:

  • Day 0: Petition filed; automatic stay in effect.
  • Within 7–14 days: Trustee and creditors receive notice; creditor communications should stop.
  • Around 20–40 days: 341 meeting of creditors occurs (creditor questions are rare but possible).
  • Any time during the case: a creditor may file a motion for relief from stay; the court will schedule a hearing.

What happens if a creditor ignores the stay?

Creditors who knowingly violate the automatic stay can be sanctioned. The Bankruptcy Code allows debtors to seek actual damages, attorney’s fees, and in some cases punitive damages for willful violations (11 U.S.C. §362(k)). Common creditor violations include continuing calls, attempting repossession, or taking judgment enforcement steps after filing.

If a creditor contacts you after filing:

  • Notify your attorney immediately and provide your contact log and copies of communications.
  • Ask the creditor to stop and to confirm in writing that they will not continue collection efforts.
  • Your attorney can file a motion with the bankruptcy court seeking sanctions and a declaration that the stay was violated.

How secured creditors and foreclosure differ

The stay temporarily prevents foreclosures and repossessions, but secured creditors can move the court to lift the stay. Relief from stay is typically granted if the creditor demonstrates lack of adequate protection (for example, negative equity in collateral or continuing decline in value).

In Chapter 13, the plan can cure arrears on a mortgage over time while the stay shields the debtor from foreclosure, but the debtor must keep making current post-petition payments to avoid losing the property.

Co-debtor stay and wage garnishments

  • Co-debtor stay: Chapter 13 includes additional protections for co-signers (co-debtors) under 11 U.S.C. §1301 in certain circumstances. Check with counsel whether your case triggers co-debtor protection.
  • Wage garnishments: The automatic stay should halt most wage garnishments once the employer is notified. If garnished funds were taken pre-petition, recovering those funds can be complex — discuss recovery options with your attorney.

Exceptions that frequently surprise borrowers

  • Eviction: Residential evictions may not be stopped in all cases (for example, if the landlord had already obtained a judgment for possession before the filing). The rules are fact-specific.
  • Certain tax and government enforcement actions: Some tax assessments and prioritized obligations will survive bankruptcy or be treated differently.

Refer to official guidance for precise limits: U.S. Courts (Automatic Stay) and CFPB resources on debt collection during bankruptcy.

Practical tips and best practices

  • Do not rely on the stay to erase debts — it pauses collection; discharge or repayment plan addresses the underlying liability.
  • Keep communication in writing when possible and hand everything to your bankruptcy attorney.
  • If you have a looming foreclosure sale, file early and give your lawyer the sale date and proof — the stay can often stop a sale if filed before the sale occurs.
  • Consider the timing and type of bankruptcy (Chapter 7 vs Chapter 13) with an advisor; Chapter 13 is often better if you want to keep property and cure arrears.

In my practice

Clients often tell me the psychological relief of the automatic stay is as important as the legal protection. It stops creditor harassment and gives people the space to participate in the bankruptcy process and negotiate with creditors. But the stay is a tool — effective when used properly and with accurate paperwork and counsel.

Resources and further reading

Disclaimer

This article is educational and does not constitute legal advice. Bankruptcy law is fact-specific and changes over time — consult a qualified bankruptcy attorney about your situation. The information above is current as of 2025 and references federal law (11 U.S.C. §362) and federal court guidance (U.S. Courts) for foundational rules.