The Automatic Stay in Bankruptcy
The Automatic Stay is the legal process by which a bankruptcy stops a foreclosure sale. Once you file a bankruptcy in federal bankruptcy court you should notify the trustee with your bankruptcy case number and your sale will “automatically” be stopped. This process is known as the Automatic Stay and it applies to bankruptcy under any chapter.
The Automatic Stay requires all collection efforts to immediately cease upon the filing of a voluntary or involuntary bankruptcy petition. The automatic stay ends when a bankruptcy is closed or dismissed or upon the discharge of the debtor. When the automatic stay ends the trustee and the lender may be able to resume foreclosure, depending on whether the bankruptcy was dismissed or discharged and what rights the bankruptcy has left them.
A limited exception to the automatic stay may occur in cases where a debtor has abused the bankruptcy court’s jurisdiction by filing multiple “sham” bankruptcies. In instances of serial bankruptcy filing the bankruptcy court may dismiss a case and accompany it with an injunction that prohibits the refiling of a new petition. If the debtor files a subsequent bankruptcy after such an injunctive order by the bankruptcy court, a creditor’s action in violation of the automatic stay may be allowed to stand.