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). An individual injured by a willful violation can recover actual damages and attorney's fees, and punitive damages in appropriate circumstances.
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 create, perfect, or enforce liens against the debtor's property securing pre-petition claims; (6) acts to collect, assess, or recover pre-petition claims; (7) setoffs of pre-petition debts; (8) 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) presentment of negotiable instruments and notice of dishonor. 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) lets an individual injured by a willful stay violation recover: (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, stay compliance is an operational matter. Creditors commonly monitor PACER and electronic case notices, stop collection once they learn of a filing, alert collection agents and counsel, move for relief under § 362(d) when grounds exist, and keep records showing compliance. Debtors commonly give creditors prompt notice of the filing and keep records of any post-petition collection activity, since recovery under § 362(k) requires proof of a willful violation and resulting injury.