- Instructor: Attorney Bob Schaller
- Lectures: 5
The Automatic Stay Injunction Protection.
The “automatic stay” is a statutory injunction against efforts outside of bankruptcy to collect debts from a debtor who is under the protection of the bankruptcy court. Saint Catherine Hospital of Indiana v. Indiana Family and Social Services Admin., 800 F.3d 312, 315 (7th Cir. 2015). Generally, § 362(a) of Title 11 causes the filing of a bankruptcy petition to operate as a stay, i.e. injunction, applicable to all entities. 11 U.S.C. § 362(a).
The automatic stay is perhaps the most powerful tool in a debtor’s bankruptcy toolbox. Individual debtors certainly file Chapter 7 bankruptcy to discharge their debts. However, the timing of the bankruptcy filing is often dictated by the debtor’s need for automatic stay protection. It is not unusual for a debtor to file bankruptcy on the eve of financial collapse in an effort to stave off financial calamity caused by creditor aggression.
Perhaps the most fundamental aspect of the automatic stay is its power to stay (enjoin) the commencement or continuation of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the bankruptcy case. 11 U.S.C. § 362(a)(1). The stay also extends to the issuance or employment of process. Furthermore, the stay enjoins any creditor’s attempt to recover a claim against the debtor that arose before the commencement of the bankruptcy case. 11 U.S.C. § 362(a)(1).
The automatic stay also stays the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title. 11 U.S.C. § 362(a)(2). Creditors are also enjoined from 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. 11 U.S.C. § 362(a)(3).
The automatic stay stays: (a) any act to create, perfect, or enforce any lien against property of the estate (11 U.S.C. § 362(a)(4)); (b) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title (11 U.S.C. § 362(a)(5)); (c) and any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title (11 U.S.C. § 362(a)(6)).
Creditors are also enjoined from 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. 11 U.S.C. § 362(a)(7). Finally, the filing of the Chapter 7 bankruptcy petition operates to stay the commencement or continuation of a proceeding before the United States Tax Court concerning a tax liability of a debtor that is a corporation for a taxable period the bankruptcy court may determine or concerning the tax liability of a debtor who is an individual for a taxable period ending before the date of the order for relief under this title. 11 U.S.C. § 362(a)(8).
