Automatic stay

What is Automatic stay?

Under the bankruptcy code, when a party files a bankruptcy petition it has the same effect as stopping or staying most proceedings or legal actions involving the debtor. Because no additional application needs to be made to the bankruptcy court to effectuate the stay, it is deemed to be "automatic" upon the filing of a bankruptcy petition. In a foreclosure context, many debtors will file a bankruptcy petition shortly before a foreclosure sale is set to take place. This action stays the process and will delay the foreclosure until the bankruptcy court can address the situation.