The automatic stay provides a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. A stay of creditor actions against the debtor automatically goes into effect when the bankruptcy petition is filed. The stay provides a breathing spell for the debtor, during which negotiations can take place to try to resolve the difficulties in the debtor's financial situation.
In Texas, as in all states, the automatic stay is a fundamental provision of the federal Bankruptcy Code (11 U.S.C. § 362) that takes effect immediately upon the filing of a bankruptcy petition. The automatic stay temporarily halts most creditors from pursuing collection activities against the debtor. This includes stopping lawsuits, foreclosures, repossessions, and wage garnishments. The purpose of the automatic stay is to provide a 'breathing spell' for the debtor, allowing them time to reorganize their finances without the pressure of creditor actions. It also ensures that all creditors are treated fairly by preventing one creditor from pursuing its own remedy against the debtor's property to the detriment of other creditors. In Texas, state law exemptions may also play a role in what property a debtor is able to protect from seizure during the bankruptcy process. However, the automatic stay is a federal provision and applies uniformly across all states, superseding state creditor remedies while the stay is in effect.
