The stay stops creditors from harassing the debtor with lawsuits or other collection attempts that may further dissipate the debtor's energy and financial resources. It also prevents creditors (especially secured creditors) from carrying off assets that are necessary to the debtor's livelihood or business. [HR Rep. No. 95-595 (1977) 340-342; Sen. Rep. No. 95-989 (1978); see In re Schwartz (9th Cir. 1992) 954 F2d 569; 571; In re Computer Communications, Inc. (9th Cir. 1987) 824 F2d 725, 729].
The automatic stay is codified in 11 USC Section 362 and operates as an injunction that prevents creditors and other parties from taking most actions against property of the bankruptcy estate, the debtor, and the debtor's property. The automatic stay "imposes an affirmative duty (on creditors) to discontinue post-petition collection actions." [Eskanos & Adler, P.C. v. Leetien (9th Cir. 2002) 309 F3d 1210, 1216.
Whether the automatic stay goes into effect and the breadth of the stay depend on whether the individual has filed bankruptcy before and the timing of the dismissal or the disposition of the prior case. There are also several exceptions to the stay and upon noticed motion by creditors or interested parties, the bankruptcy court may modify or vacate the stay.
Discussing your individual facts and history will allow our attorneys to examine the benefit and breadth of the stay to help you reorganize.