Understanding the Automatic Stay in Bankruptcy: How It Protects You
When facing overwhelming debt, creditor harassment, or the threat of foreclosure, filing for bankruptcy can provide immediate relief. One of the most powerful tools available to debtors in bankruptcy is the automatic stay—a legal protection that immediately halts most collection actions as soon as a bankruptcy case is filed.
At Williamson & Siler, S.C., we help individuals in Hudson, River Falls, New Richmond, Baldwin, and throughout St. Croix County understand their rights under the automatic stay and how it can provide much-needed relief during financial hardship.
What Is the Automatic Stay?
The automatic stay is a legal injunction that goes into effect immediately when you file for bankruptcy, whether under Chapter 7 or Chapter 13. It prevents creditors from taking collection actions against you while your bankruptcy case is active.
This means no more harassing phone calls, wage garnishments, lawsuits, or foreclosure proceedings—creditors must immediately stop all efforts to collect debts unless they receive special permission from the bankruptcy court.
What Protections Does the Automatic Stay Provide?
1. Stops Creditor Harassment & Collection Calls
Tired of constant calls from creditors? Once your bankruptcy case is filed, the automatic stay forbids creditors from contacting you about debts. This includes:
✅ Phone calls from collection agencies
✅ Demand letters & emails
✅ Threats of lawsuits
If a creditor continues collection efforts after being notified of the bankruptcy, they may face legal penalties for violating the stay.
2. Halts Foreclosure & Eviction Proceedings
✔️ Foreclosure Protection – If you’re behind on your mortgage and facing foreclosure, the automatic stay immediately pauses foreclosure actions. This gives homeowners time to explore options such as loan modifications or filing for Chapter 13 bankruptcy to catch up on payments.
✔️ Eviction Protections – In some cases, an automatic stay can delay eviction proceedings, but it depends on whether a judgment has already been issued. If your landlord has not yet obtained an eviction order, the stay may temporarily prevent eviction.
3. Stops Wage Garnishments
If a creditor is garnishing your wages, filing for bankruptcy immediately stops wage garnishments. This means:
✅ Your paycheck stays intact
✅ No more automatic deductions for unpaid debts
✅ You regain control over your income
In some cases, wages that were already garnished before filing may be refunded if the bankruptcy eliminates the underlying debt.
4. Prevents Utility Shutoffs
If you’re behind on electric, gas, water, or phone bills, your utility provider cannot disconnect your services after you file for bankruptcy. While the automatic stay does not erase unpaid bills, it gives you time to arrange payment without the immediate threat of losing essential services.
⏳ Protection Period: Utility companies must wait at least 20 days before taking action, giving you time to work out a solution.
5. Stops Lawsuits & Debt Collection Cases
If a creditor has filed a lawsuit against you for unpaid medical bills, credit card debt, personal loans, or other debts, the automatic stay immediately halts the case.
📌 Examples of Lawsuits Stopped by the Automatic Stay:
✔️ Debt collection lawsuits
✔️ Breach of contract claims
✔️ Car repossession lawsuits
The automatic stay does not apply to certain legal matters, such as criminal cases or child support proceedings, but it provides broad protection against most debt-related lawsuits.
How Long Does the Automatic Stay Last?
The automatic stay remains in effect for the duration of your bankruptcy case, unless:
- A creditor files a motion to lift the stay and is granted approval by the court.
- Your case is dismissed before discharge.
- You have filed multiple bankruptcies in a short period, which may limit stay protections.
Does the Automatic Stay Apply to All Debts?
While the automatic stay protects against most collection actions, some debts are not covered under bankruptcy law. These include:
❌ Child support & alimony payments – These obligations must continue even after filing.
❌ Certain tax debts – The IRS may still take action, but bankruptcy can help restructure payments.
❌ Criminal fines & restitution – Bankruptcy does not eliminate penalties from criminal convictions.
If you have debts that are not dischargeable, we can help you explore other options for relief.
What If a Creditor Violates the Automatic Stay?
If a creditor ignores the automatic stay and continues collection efforts, they are violating federal bankruptcy laws and may face:
✅ Fines & penalties imposed by the court
✅ Lawsuits for damages caused by the violation
✅ Potential debt discharge penalties
If a creditor is still harassing you after filing bankruptcy, contact us immediately. We will take legal action to enforce your rights.
Chapter 7 vs. Chapter 13: How the Automatic Stay Works in Each Case
| Protection | Chapter 7 Bankruptcy | Chapter 13 Bankruptcy |
|---|---|---|
| Creditor Calls & Collection Efforts | ✅ Stops collection attempts | ✅ Stops collection attempts |
| Foreclosure Protection | ⏳ Temporary delay | 🏡 Can prevent foreclosure with repayment plan |
| Wage Garnishments | ✅ Stops immediately | ✅ Stops immediately |
| Utility Shutoffs | ✅ Prevents immediate shutoff | ✅ Prevents immediate shutoff |
| Eviction | ⏳ May delay eviction | ⏳ May delay eviction |
| Lawsuits | ✅ Stops debt collection cases | ✅ Stops debt collection cases |
⏳ Need help deciding which option is best for you? Contact us for a consultation.
Get Protection Under the Automatic Stay – Call Us Today
If you’re struggling with creditor harassment, foreclosure, or wage garnishments, the automatic stay can provide the relief you need to regain financial stability.
At Williamson & Siler, S.C., we help clients throughout Hudson, New Richmond, River Falls, Baldwin, Somerset, and St. Croix County take full advantage of bankruptcy protections.
📞 Call us today to schedule a consultation and start your path to financial freedom.
