Automatic Stay
An immediate, self-executing injunction triggered by the filing of a bankruptcy petition under 11 U.S.C. § 362. Halts virtually all creditor collection actions against the debtor or property of the bankruptcy estate, lawsuits, foreclosures, repossessions, garnishments, and informal collection. Provides the debtor breathing space and ensures orderly bankruptcy administration. Specific exceptions exist (criminal proceedings, certain tax matters, domestic support obligations). Violations can carry actual damages, punitive damages, and attorney's fees.
The Automatic Stay is an immediate, self-executing injunction triggered by the filing of a bankruptcy petition under 11 U.S.C. § 362. The stay halts virtually all creditor collection actions against the debtor or property of the bankruptcy estate. Among the most powerful tools in U.S. bankruptcy law, the automatic stay provides the debtor breathing space and ensures orderly bankruptcy administration by centralizing creditor claims in a single forum.
Scope of the stay
Section 362(a) stays virtually all creditor actions: (1) commencement or continuation of judicial, administrative, or other proceedings against the debtor; (2) enforcement of pre-petition judgments; (3) acts to obtain possession of property of the estate; (4) acts to create, perfect, or enforce liens against estate property; (5) acts to collect, assess, or recover pre-petition claims; (6) setoffs of pre-petition debts; (7) certain tax court proceedings. The stay applies immediately on petition filing without any court order required.
Common exceptions, § 362(b)
Specific exceptions allow continuation of: (1) criminal proceedings; (2) domestic support obligations and certain related proceedings; (3) tax audits, deficiency notices, and certain assessments; (4) governmental regulatory and police power actions (not collection of money judgments); (5) certain securities-related setoffs; (6) commercial real estate evictions in some circumstances; (7) negotiation of certain commercial loan terms. The exceptions reflect public policy judgments about which actions outweigh debtor breathing-space goals.
Relief from stay, § 362(d)
Creditors can seek relief from stay on grounds: (1) cause, including lack of adequate protection of secured creditor's interest; (2) no equity in property + property not necessary for effective reorganization; (3) single asset real estate cases with specific timing requirements; (4) in rem orders for serial filers. Relief motions are heard on expedited schedule. Common relief grounds: foreclosure on unprotected collateral, eviction for non-payment of rent, continuation of pending litigation.
Damages for violations
Section 362(k) provides damages for willful stay violations: (1) actual damages, losses caused by violation; (2) attorney's fees; (3) punitive damages in appropriate circumstances. "Willful" means knowing of the bankruptcy filing and intentionally taking the action, not requiring specific intent to violate. Common violations: continued collection calls, repossessions after notice, garnishments not stopped. Sophisticated creditors maintain bankruptcy notice protocols to avoid violations.
For Texas creditors, automatic stay compliance is operational. Best practice: (1) maintain bankruptcy notice protocols, search PACER, register for ECF notifications; (2) immediately halt all collection upon notice of filing; (3) coordinate with collection agents and counsel; (4) seek relief from stay through proper motion when appropriate; (5) document compliance to defend against violation claims. For debtors: (1) understand stay scope and exceptions; (2) provide notice to creditors promptly; (3) document violations contemporaneously with damage evidence; (4) coordinate with bankruptcy counsel for stay enforcement.