Definition of the Automatic Stay: A statutory injunction that protects (a) the debtor and (b) the property of the estate. There are many exceptions to the stay and a creditor may seek relief from the stay. The stay continues until terminated or until the case ends. At the end of the case, the automatic stay is transformed into the statutory injunction of the discharge.

1. The Stay
The filing of a bankruptcy petition triggers an “automatic stay” that brings a halt to just about anything the creditor might do to liquidate its claim. [362 (a)] Indeed, it is one very good reason to file bankruptcy; the stay brings the collection efforts to a screeching, grinding halt. A lot of debtors file bankruptcy to stop a mortgage foreclosure or a tax lien sale. Some file to stop a lawsuit in its tracks. The way to understand the stay is to recognize that it does two jobs:

• It protects the debtor from lawsuits, dunning letters, phone calls and whatever else might pursue him did he did not file. It gives him a chance to get on with his life or, in reorganization cases, a chance to concentrate on a “plan.”

• It protects the property of the estate from cherry-picking so that the trustee can superintend the liquidation or, as appropriate, preserve the going-concern value in a reorganization.

Think of the stay as a kind of “statutory injunction” (though purists would say there is no such thing; an injunction comes not from the legislature, but from the court).

If the stay continues through the case, then it teams up with the debtor’s discharge to protect the debtor indefinitely. Creditors may seek and sometimes get “relief from the stay.” Most creditors who seek and get relief from the stay are secured creditors trying to foreclose, so we deal with that topic below. See IV C (3).

See Also Bankruptcy Lawyers Boston