Upon your bankruptcy attorney filing the bankruptcy petition, an invisible curtain, called the automatic stay, falls over your assets and protects them from a myriad of creditor actions. The actions that the automatic stay prevents are stopped, totally, and immediately. For most people who seek a bankruptcy lawyer at the last minute before a series of unwanted events occur, the automatic stay offers their only solution. The stay that filing bankruptcy puts into place freezes all of your assets and prevents creditors from collecting on their claim.

The automatic stay prevents any act to collect, assess, or recover a claim against the bankruptcy filer that arose before the case began. Creditors may not engage in any collection activity or attempt to force the debtor to pay a pre-petition (before filing) claim. Collection activity that is prohibited includes communications via mail, telephone, in person, or by a third party. The stay also protects against the setoff of any debt belonging to the debtor that arose before the case was filed. However, it is important to note that the Supreme Court has ruled that a temporary freeze and setoff is accepted from banks that are owed money by the bankruptcy filer. A simple solution to this would be to empty bank accounts prior to filing the bankruptcy. In addition to these things the bankruptcy stay halts any proceeding before the United States Tax Court.

The protection of the automatic stay varies slightly depending on whether you filed a Chapter 7 or a Chapter 13. The greatest difference in protection between the two types of filings has to do with the duration of the automatic stay. For a Chapter 7 filing the automatic stay is in place for the entire 3 to 6 month lifespan of the bankruptcy barring exigent circumstances. For a Chapter 13 filing the same is true, but it generally lasts for much longer. Under the new bankruptcy laws that went into effect on October 17, 2005 the automatic stay's duration and existence is dependant upon the number of previous bankruptcy filing within the last year. For individuals with one prior bankruptcy dismissal within the past year, the automatic stay will only be in place for the first month of the bankruptcy filing and your bankruptcy lawyer must file a motion to extend the automatic stay in order to maintain the stay protection. For individuals with two prior dismissal within the past year, the stay will not be put into place until your bankruptcy attorney files a Motion to Invoke the automatic stay and has the motion approved and signed by a judge.

The bankruptcy stay may be lifted during a bankruptcy in regards to a particular piece of property in cases that a creditor has "shown cause" to have the stay lifted. The cause for removing (lifting) the stay could be anything. The key is that a bankruptcy judge must approve of the reason. The most common reason for people to have the stay lifted in their case is non-payment. When individuals in a bankruptcy ceases to make payments to their secured creditors being paid directly the creditor in question will file a Motion for Relief or a Motion to Lift the Automatic Stay. These filings are the creditor petitioning the court to remove the stay protect on the that property and allow for the repossession or foreclosure of the property. Generally the creditor filing the motion for the first time will allow for an agreement to resolve the situation before the stay is lifted.