The filing of a bankruptcy case, under any chapter of the Bankruptcy Code, triggers an injunction against the continuance of any action by any creditor against the debtor or the debtor's property.  11 U.S.C. Sec. 362.  Under this statute, "a petition filed under [the Bankruptcy Code] ... operates as a stay, applicable to all entities" of the following:  (1) "judicial, administrative, or other action or proceeding against the debtor," (2)  the enforcement of a judgment obtained before the commencement of the bankruptcy case, (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 lien, (5)  any effort to enforce a lien that arose before the commencement of the case, (6)  "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case....",  (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, and (8) the commencement or continuation of a proceeding before the United States Tax Court.

Under Section 362, the stay begins at the moment the bankruptcy petition is filed.  Secured creditors may, however, petition the bankruptcy court for relief from the automatic stay upon a showing of cause.  A bankruptcy court may give a creditor relief from the stay if the creditor can show that the stay does not give the creditor "adequate protection" or if it jeopardizes the creditor's interest in certain property.

Concerned that debtors may exploit some of the advantages of automatic stay provisions, Congress - through 1994 amendments to the Bankruptcy Code - provided some relief from the automatic stay to certain creditors, particularly those creditors who have a secured interest in a single real estate asset. Congress now requires such debtors to either file a plan, or to make monthly payments to each such secured creditor, in an amount equal to interest at a current fair market rate on the value of the creditor's real estate.

Also, as part of the 2005 Amendments to the Bankruptcy Code, Congress added two more exceptions to the automatic stay provisions. These exceptions concern landlords seeking to evict tenants. First, any eviction proceedings in which the landlord obtained a judgment of possession prior to the filing of the bankruptcy petition may be continued. Second, eviction proceedings filed after bankruptcy proceedings are exempt if it involves evicting the tenant on the basis of using illegal substances or endangerment of the property.  These new provisions also placed certain restrictions upon the automatic stay in cases where the debtor had previously filed for bankruptcy.

The practical effect of the automatic stay, as it relates to the typical consumer debtor, was recently discussed in this entry at the National Bankruptcy Forum.

-Drew Broaddus