When a debtor files for bankruptcy, a court order called the "automatic stay" acts as an automatic injunction that halts collection actions taken by a creditor to collect debts from the debtor. Once the automatic stay begins, creditors can not:
● seize or file a lien against the debtor's property
● file a civil lawsuit against the debtor
● cut off the debtor's utility service
● evict the debtor
● foreclose on the debtor's mortgage
There are some instances where the automatic stay does NOT stop collection activity:
● criminal proceedings (e.g. you will still be required to pay fines that were assessed as a punishment or writing a bad check)
● collection of alimony and child support
● The IRS can still conduct an audit, demand tax returns, and issue tax assessments and tax deficiency notices. But the automatic stay does temporarily stop the IRS from issuing liens or seizing the debtor's property or income.
The automatic stay begins at the moment the petition for bankruptcy is filed, and it applies to creditors whether they know about the bankruptcy or not. Willful violations of the automatic stay can result in damages, attorney fees, and even punitive damages.
