Automatic Stay Law and Legal Definition

Automatic stay is an injunction granted by a court in a bankruptcy proceeding. According to 11 USCS § 362a petition filed under section 301, 302, or 303 of this title [11 USCS § 301, 302, or 303], or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970 [15 USCS § 78eee(a)(3)], operates as a stay against the continuance of any action by any creditor against the debtor or the debtor's property. It automatically stops lawsuits, foreclosures, garnishments, repossessions, foreclosure sales and all collection activity against a debtor. An automatic stay is granted immediately on filing a bankruptcy petition. Automatic stay provisions helps to protect a debtor from creditor’s action of initiating judicial proceeding. It will remain in effect until a judge lifts the stay at creditor’s request, the debtor gets a discharge, or if the property item is no longer estate property.

Automatic stay will not stay criminal proceedings, actions for a family support order or its modification, actions to collect support from property that is not estate property, demand for tax returns or assessment of tax. Violation of automatic stay will be punished with actual damages as well as punitive damages in some cases.