Automatic Stay in Chapter 7 Bankruptcy

Whenever an individual files for a bankruptcy under the U.S. bankruptcy code, he gets a stay called as automatic stay. This stay means that any proceeding going over the individual with regard to the loan he owes has to stop. This comes into effect as soon as you file for bankruptcy. In case a creditor or mortgage lender does not obey this stay rule, criminal proceeding can take place against them. It is only the bankruptcy court that has any right to do a proceeding in any circumstances until the cases not resolved.

When a person files bankruptcy under chapter automatic stay can stop the sheriff's sale. This is valid until after the case is closed.

Basically a chapter stay continues until the discharged is granted or the case is dismissed. Henceforth the property is not your bankruptcy estate.

In case the sheriff's sale has already taken place, but the period is still the redemption period, then you can get an extension for your redemption period. This can go up to 60 days from the date of filing of the bankruptcy petition.

Automatic stay is levied to protect the debtor from any legal proceedings by a creditor. It is covered under the [11 U.S.C. §362]. In most cases chapter are pending for about three to four months and while that time the debtor doesn't need to leave his home (if the home is under liquidation for clearing the bankruptcy debt).

Most of the people believe that automatic stay is very important. In fact, it is even more important than the discharge of debts. This is because it gives time to the debtor to decide upon and until then the debtor is free from the harassment from the creditor's side. This is because it has been observed that when the loan is not paid on time creditors take various extreme steps to recover the money. This included illegally repossessing the loan property like car, or home or giving threatening calls and letters.

Another major benefit of the automatic stay is that although temporarily it can stop a foreclosure. This will give the debtor time to rearrange mortgage.

This automatic stay will expire once the debtor gets a discharge from the bankruptcy court. However, once a debtor gets a discharge, the creditors can ask for repayment of loan that was not covered under the bankruptcy case.