When you file for bankruptcy, the court puts an injunction in place known as an automatic stay. You don't have to do anything – it happens automatically. The stay prohibits creditors from attempting to collect debts from you while your bankruptcy process is underway, and it gives you some breathing room while you sort out your financial affairs.
The automatic stay goes into effect the moment you file your bankruptcy petition. Any lawsuits filed against you, wage garnishments in place, pending utility disconnections, and foreclosure, eviction or repossession proceedings must immediately stop. This protection usually lasts until you receive your bankruptcy discharge – that is, until your case is successfully closed and you're relieved of responsibility for paying off your debts. If you file for Chapter 7, this can be six months or less. Chapter 13 plans, where you agree to repay your creditors under court supervision, usually last three to five years. Because bankruptcy discharges your debts, removal of the stay at the end of your case doesn't have any negative effect on you.
The automatic stay is not to be confused with a "get out of jail free" card. It doesn't allow you to stop paying ongoing obligations. It simply gives you time to plan your next steps, free from creditor harassment. Nor does it apply to all creditors. It doesn't affect debts that cannot be discharged in bankruptcy, such as domestic support obligations like child support and alimony, and tax-related debts.
Relief From Stay
Sometimes creditors attempt to have the stay lifted so they can proceed with collection efforts against you. They can submit a motion for "relief from stay" to the court. This is a common tactic of secured creditors, those whose debts are secured by collateral, such as your home mortgage or car loan. If a secured creditor feels as that the stay puts its collateral at risk, it may petition the court for permission to reclaim the property. For example, if you fall behind with your planned payments in a Chapter 13 bankruptcy, your mortgage lender may petition the court for relief of stay so it can proceed with a foreclosure. You have the right to challenge the motion with the court.
If for some reason you don't receive a discharge and your bankruptcy case is dismissed, your automatic stay also ends. Your creditors are free to resume collection efforts against you. Halted foreclosure or repossession actions can resume. In addition, your creditors may add interest, late fees and penalties to your old balances when the stay is lifted, dating these fees back to before you filed for bankruptcy. As a result, you may find yourself more underwater than when you first filed. Additionally, if you submitted a prior petition for bankruptcy within a year, your stay will last only 30 days, not until you receive a discharge. If you filed for bankruptcy two or more times within the preceding year, you won't receive an automatic stay at all.