We have been asked many times from our clients about automatic stay, and we had discussed this matter in our blog also, But the questions are coming so often and the law has been changing, that we feel obligations to revisit this issue again.
The filing of a petition either voluntary or involuntary invokes the automatic stay. This as you may know is an umbrella against all kinds of collections and activities, and stops them right in their making. The automatic stay applies to all entities and is intended to protect the debtor and the estate.The stay acts to enjoin all efforts to collect on any debts, to take possession of collateral, to enforce or create a line, or to set off a debt against the debtor.
Bankruptcy Code Section 362(a) is very inclusive and provides that the filing of a voluntary or involuntary petition acts as a stay applicable to all entities and prohibits the following types of acts:
1. The commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under the Bankruptcy Code.
2. The enforcement, against the debtor or against the property of the estate;
3. Any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.
4. Any act to create, perfect, or enforce any line against property of the estate;
5. Any act to create, perfect, or enforce against property of the debtor any line to the extent that such lien secures a claim that arose before the commencement of the case under the Bankruptcy Code;
6. Any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under the Code;
7. The setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor.
8. Any proceeding before the US Tax Court.
What actions are not stayed?
1. Criminal proceedings;
2. Enforcement of domestic support obligations;
3. Action to perfect or maintain a purchase money security interest;
4. Enforcement of governmental regulatory and police power;
5. Setoff of mutual debts by certain creditors;
(a) a landlord may continue any eviction or unlawful detainer action against the debtor if the landlord had already obtained judgment for possession of the debtor’s rented residence before the bankruptcy petition is filed.
(b) the landlord may continue any eviction action against the debtor seeking possession of the debtor’s residence if that action is based on “endangermerment” of the real estate property.
What are the penalties for violation of the stay?
-Punitive damag4es, fees, costs and contempt of court