The automatic stay of bankruptcy is a powerful consumer protection device. Contained in Section 362 of the US Bankruptcy Code, it stops most creditor actions against you from the time your case is filed. But automatic suspension doesn’t last forever.
In general, automatic suspension ends when one of these three actions occurs:
- when your case is closed;
- at the time your case is dismissed; Prayed
- when your download is granted or denied.
If the bankruptcy discharge is granted and the case is closed, then the automatic stay becomes permanent in the form of the discharge order. If the case is dismissed or the discharge is denied, creditors can take action against you. But the automatic stay can end early if you filed a previous case within the last year. For example:
If you have filed a Chapter 7, 11 or 13 case that was dismissed within the last year, the stay with respect to any action taken with respect to a debt or property securing said debt or with respect to any lease ends on the 30th day after the filing of the last case unless the court orders otherwise.
If you have filed more than one Chapter 7, 11 or 13 case that was dismissed within the last year, you do not get the protection of the automatic stay unless the court orders otherwise.
Your creditors may also, under certain circumstances, request that the bankruptcy court lift the stay to allow them to take action against you or your property. There are specific requirements governing your ability to do so, and the court will require certain proof before lifting the suspension.
Typically, the motion for relief from stay (as it’s called) will be filed by a mortgage company or auto lender when you fall behind on your payments. They will want the stay lifted so they can begin or continue foreclosure proceedings, or get the property back immediately.
Motions for relief from stay are also sometimes filed when someone is suing you before filing your case, or in other limited situations. Credit card companies and other unsecured creditors will generally not file a petition for relief from stay because there is nothing to be gained by doing so; in a Chapter 7 case, your debt will be discharged within a few months anyway.
Even if the automatic stay is lifted, that does not mean that your bankruptcy case will fail. You may still be able to get a discharge from your debts; the injunction of dismissal will effectively re-impose the ban on taking action against you.