the suspension of actions, such as debt collection or foreclosure, against the company or consumer in bankruptcy. Occurs automatically when the bankruptcy petition is filed. This action protects the debtor from creditors seeking to seize its assets. It protects some creditors in that it prevents one creditor from obtaining an excessive share of the assets of the bankrupt to the exclusion of the other creditors.
In United States bankruptcy law, an automatic stay is an automatic injunction that halts actions by creditors, with certain exceptions, to collect debts from a debtor who has declared bankruptcy. Under section 362 of the United States Bankruptcy Code, the stay begins at the moment the bankruptcy petition is filed. Secured creditors may, however, petition the bankruptcy court for relief from the automatic stay upon a showing of cause.
