The automatic stay provides a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. The stay automatically goes into effect when the bankruptcy petition is filed and provides a breathing spell for the debtor, during which negotiations can take place to try to resolve the difficulties in the debtor’s finances. 11 U.S.C. § 362(a).
The filing of a petition, however, does not operate as a stay for certain types of actions listed under 11 U.S.C. § 362(b). For example, the stay does not apply to the commencement or continuation of a criminal action or proceeding against the debtor or the commencement or continuation of a civil action or proceeding
- for the establishment of paternity;
- for the establishment or modification of an order for domestic support obligations;
- concerning child custody or visitation; or
- for the dissolution of a marriage, except to the extent that such proceeding seeks to determine the division of property that is property of the estate.
Under specific circumstances, the secured creditor can obtain relief from the automatic stay. For example, when the debtor has no equity in the property and the property is not necessary for an effective reorganization, the secured creditor can seek an order of the court lifting the stay to permit the creditor to foreclose on the property, sell it, and apply the proceeds to the debt. 11 U.S.C. § 362(d). Unsecured creditors can also seek relief from the automatic stay, for example, to continue state court litigation that was pending before the Chapter 11 case was filed.
