Stop garnishment and debt collection with an automatic stay
The automatic stay is one of the most valuable tools of U.S. bankruptcy protection. Under federal bankruptcy law, as soon as a debtor files for Chapter 7, Chapter 13 or another form of bankruptcy, the automatic stay goes into effect. This means that all debt collection, garnishments, evictions, foreclosures, utility shut-offs, repossessions, and certain lawsuits will come to a halt for the duration of the bankruptcy proceeding.
The automatic stay takes effect at the moment of filing, and it does not matter whether the filer ultimately receives bankruptcy protection (although the stay will be lifted upon the dismissal of a bankruptcy case). However, an automatic stay does not offer absolute protection against creditors. U.S. bankruptcy law gives creditors a few ways around a stay.
First, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult for debtors to repeatedly use bankruptcy as a shield against creditors and debt. Under the law, an automatic stay is limited to a 30-day duration if a debtor has had a bankruptcy case dismissed within the previous 12 months. If the debtor has had two or more bankruptcies dismissed within a year, the stay does not go into effect, leaving debtors with no protection from creditors. A debtor may appeal the denial of the automatic stay, but it will likely be a much longer process than the instant protection usually offered by the stay.
Second, after the automatic stay goes into effect, creditors may petition the bankruptcy court to continue to seek payment on a debt or to continue some other form of debt collection. Although it is not likely, a bankruptcy judge has the power to lift the stay and order a debtor to make payments on a debt. The creditor will have to show some very compelling reason in order for the stay to be lifted, however.
Source: Bankruptcy Home, “How Good is an Automatic Stay?” 14 April 2011