What Is Automatic Stay in Bankruptcy?

Benefits

• An automatic stay can save your home.house image by Cora Reed from Fotolia.com
  
  An automatic stay provides the debtor relief from most collection actions. In a Chapter 13 bankruptcy, a stay gives the debtor time to decide how to reorganize debt. In a Chapter 7 bankruptcy, it protects the debtor's exempt property. The types and amounts of exempt properties vary based on state and federal law.
  
  

Time Frame

• An automatic stay can be terminated by a court.law courts image by Peter Helin from Fotolia.com
  
  The duration of an automatic stay can vary depending on the type of bankruptcy a debtor files. A Chapter 7 bankruptcy can last 60 to 90 days or longer, while a Chapter 13 bankruptcy is typically three to five years in length.
  
  

Acts Prohibited

• Phone calls from debt collectors must cease during a stay.customer support image by 26kot from Fotolia.com
  
  A stay prohibits any collection acts by the creditor. This includes repossession of vehicles, garnishment of wages, foreclosure and telephone calls from a creditor and any agency acting on behalf of the creditor. If a creditor willingly violates an automatic stay, it can be held in contempt of court and fined.
  
  

Exceptions

• Some government debts are not protected by an automatic stay.tax forms image by Chad McDermott from Fotolia.com
  
  An automatic stay does not prevent an Internal Revenue Service (IRS) audit, tax assessment or demand of payment for a tax assessment. The IRS is prevented from issuing a tax lien or seizing property or income, however. Child support, alimony payments and criminal proceedings are not protected by a stay.
  
  

Creditor Relief

• An automatic stay is not absolute.Model Homes image by Chad McDermott from Fotolia.com
  
  A stay is not permanent and can be lifted if a creditor can prove "cause" for granting relief. The most common form of relief is to provide adequate protection for the property. For example, the court may grant the creditor relief if the property is not insured. In many cases, a stay can be lifted if no equity is in the property and the property is not needed for a reorganization.