The automatic stay is something that occurs when you file bankruptcy of any type. While it isn't fully comprehensive, the automatic stay is a powerful tool for those who are facing immediate debt crisis because it puts a stop to a number of collection activities while the bankruptcy proceeding takes place.
One of the top benefits of the automatic stay for many individuals who file bankruptcy is that it stops foreclosure. Even if you are already in foreclosure and your home is scheduled to be sold at auction, filing a bankruptcy petition in time causes the automatic stay to go into effect, which means your home cannot be sold. The mortgage company also has to stop certain collections actions against you while the bankruptcy case is active.
The automatic stay also stops other creditor collection activities, including credit card collection calls and evictions. If you are behind on utility bills, the automatic stay can stop your gas, water or electricity from being turned off. The automatic stay also stops wage garnishment or levies on your bank account and keeps new garnishment filings from occurring.
Powerful though it might be, the automatic stay isn't all-powerful. It can't stop certain actions with regard to tax burdens or child support payments, for example, though it will keep the Internal Revenue Service from filing a tax lien against your property or earnings. Your automatic stay might also be cut short if you've previously filed bankruptcy. To understand the benefits that the automatic stay might bring to your case, speak with a bankruptcy lawyer about your options.
Source: FindLaw, "The Automatic Stay: Stopping Creditors with Bankruptcy," accessed July 22, 2016