please define what The automatic stay in Bankruptcy prevents?
An "automatic stay" is a state triggered when an individual files for bankruptcy protection. Basically, when someone files for bankruptcy in the United States the automatic stay provision keeps creditors from initiating certain kinds of actions against the debtors. It has its nuances, but here are the main points:
- Creditors cannot begin a new lawsuit to claim property or garnish wages,
- Creditors cannot repossess property
The important part is the word "stay." All this means is that it puts these actions on hold. The most useful provision is that it puts foreclosures on hold and gives homeowners a chance to resume making the proper payments and avoid being evicted.
This isn't a "get out of jail free" card, though. Those parties that have an interest in "real" property you own, such as a car, can ask the judge for "relief." This allows someone like a car dealer to take back a car that you haven't been paying on. The stay doesn't save the car, but it makes it so that a judge has to approve the process.
Because a good deal of unsecured debt (i.e. credit card) ends up being discharged (i.e. erased) the real questions have to do with the house, boat, car, etc. These are secured debts that have property behind them (the lender agreed to lend you money for a specific tangible item.) The "automatic stay" creates a certain amount of order to the process of making sure these creditors have a fair chance of getting the item back and the the debtor has some relief from the chaos the creditors create in trying to get it back.