What the Automatic Stay Covers

Mortgage lenders and foreclosure

If your home is in foreclosure -- or a foreclosure sale is scheduled -- filing bankruptcy stops it. The automatic stay under Section 362(a)(3) and 362(a)(4) prohibits any act to obtain possession of property of the estate or to enforce a lien against it.

• Scheduled foreclosure sales are halted immediately
• The lender cannot proceed with a sheriff's sale or trustee's sale
• Pre-foreclosure collection activity must stop
• In Chapter 13, you can cure your mortgage arrearage over 3-5 years while keeping the home
• In Chapter 7, the stay delays foreclosure but does not provide a long-term cure mechanism

Car lenders and repossession

Section 362(a)(3) prohibits any act to obtain possession of property of the estate. Your car is property of the estate. That means:

• The lender cannot repossess your vehicle after you file
• If a tow truck is on its way, filing stops the repossession
• The lender cannot call to demand you surrender the vehicle
• If the lender repossesses after filing, they may be ordered to return it

Employers and wage garnishment

If your wages are being garnished for credit card debt, medical bills, personal loans, or a lawsuit judgment, the automatic stay stops the garnishment.

• Your employer must stop withholding garnished wages once notified of the bankruptcy
• This applies to judgments, default judgments, and agreed garnishment orders
• The stay covers garnishments by private creditors, collection agencies, and in most cases, tax authorities

Debt collectors and collection agencies

The automatic stay means silence. Under Section 362(a)(6), the stay prohibits "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case." That includes:

• Phone calls demanding payment
• Collection letters and demand notices
• Emails and text messages about the debt
• Reporting new derogatory information to credit bureaus (debated across circuits, but many courts find this is a stay violation)
• Threats of legal action
• Contact with your employer, family, or references about the debt

Lawsuits and judgments

Section 362(a)(1) stays "the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor." This means:

• Pending lawsuits against you are frozen -- no hearings, no motions, no trial
• New lawsuits cannot be filed against you for pre-petition debts
• Judgment creditors cannot execute on existing judgments
• Creditors cannot record judgment liens against your property
• Discovery and depositions are halted

The stay applies in state courts, federal courts, and administrative proceedings. The only major exceptions are criminal proceedings and domestic relations cases.

Banks and account levies

If a creditor has obtained a judgment and is levying your bank account -- or threatening to -- the automatic stay stops it.

• Banks must release frozen funds (though this may require a court order or motion in practice)
• Creditors cannot serve new writs of execution or garnishment on your bank
• Setoff rights are also stayed under Section 362(a)(7), meaning a bank that holds both your deposit account and a loan cannot seize your deposits to pay the loan

Utility companies

Section 366 provides specific protection for utility services. Utilities cannot disconnect service for 20 days after the bankruptcy petition is filed, even if you owe a past-due balance.

• Electric, gas, water, and phone service cannot be shut off for 20 days
• After 20 days, the utility can require a deposit or other adequate assurance of future payment
• The utility cannot require you to pay pre-petition arrears as a condition of continued service

Landlords and eviction

The automatic stay generally pauses eviction proceedings, but this area has important exceptions:

• If no eviction judgment has been entered, the stay halts the eviction case
• If the landlord already obtained a judgment for possession before filing, the stay may not apply under Section 362(b)(22)
• In residential leases, the debtor may extend protection by filing a certification and depositing rent with the court clerk
• Commercial lease evictions are stayed under the general rules

See exceptions to the automatic stay for the full details on eviction.

IRS and state tax collection

The automatic stay stops most tax collection activity:

• IRS levies on wages and bank accounts must stop
• State tax liens cannot be enforced
• Tax sales of property are halted
• Collection notices and demand letters must stop

The statutory basis: Section 362(a)