In the majority of bankruptcy initial consultations I have conducted, I hear the same story. This story is about someone who has fallen on financial hard times. Many times, this story involves  the person recounting me about how they are paralyzed by the fear of impending lawsuits, garnishments, or foreclosure.  This story inevitably includes a comment about how collection agencies and creditors have driven that person to a full blown case of telephonophobia. This story always gets to the point where the person in the consultation explains to me how they are in a tragic situation that has spiraled out of their control. These consultations, while sad, have a silver lining. The silver lining comes when I get to tell my side of the story. My side is about the “good news” that comes with a bankruptcy. The “good news” is encapsulated in  two words involved in every bankruptcy… those two words; automatic stay.

The automatic stay is one of the fundamental aspects of bankruptcy law. It is codified in 11 U.S.C. § 362(a). In essence, the automatic stay forbids all entities from initiating  or continuing actions to collect from the debtor or take possession of property that is part of the bankruptcy estate. It goes into effect upon the filing of the bankruptcy petition, granting the petitioners immediate relief.

The automatic stay serves two main purposes. First, it provides the “good news” that those who file bankruptcy are seeking. That is to say, the automatic stay stops the harassing phone calls, it stops the pressuring collection agencies, it stops the lawsuits and it stops the foreclosures. In fact, creditors who violate the automatic stay could even be subject to sanctions or have their remedy declared void.

Second, the automatic stay ensures that the bankruptcy estate assets are properly distributed. By preventing all creditors from commencing or completing collection actions, the automatic stay stops the creditors from racing to see who can sue and collect from the Debtor first, a race which would inevitably result in a minority of creditors collecting the majority of the debtor’s non-exempt assets, to the detriment of the other creditors.

The decision to file bankruptcy is often a difficult one. However, learning about the automatic stay is usually the best news that an overwhelmed debtor can hear. If you are in a situation where you need protection from harassing phone calls, lawsuits, or garnishments, and are interested in learning more about the automatic stay, please visit us at or call us at (480) 829-9081 to schedule your free initial consultation with one of the experienced attorneys at McGuire Gardner, PLLC,  so you too can hear more good news about bankruptcy.