Automatic Stay of Proceedings in Bankruptcy or a Consumer Proposal

Bankruptcy’s Automatic Stay of Proceedings

A Stay of Proceedings goes into effect as soon as a bankruptcy or proposal is filed.

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It will stop any collection action including a wage garnishment.

The stay also prevents your creditors from contacting you and stops interest from accruing.
Automatic Stay of Proceedings

A major benefit of the consumer proposal or bankruptcy filing is a legal order known as the “Automatic Stay of Proceedings.”

This stay order is the legal order that will stop the creditors to whom the debtor owes money from contacting the debtor.

Any legal actions against the debtor cannot be undertaken by the creditors once the stay order goes into place.

The Stay of Proceedings goes into place automatically.

How Does a Stay of Proceedings Work?

Your Trustee will handle all communications with your unsecured creditors during your insolvency.

This is one of the benefits of bankruptcy.

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As long as you are in bankruptcy or you are completing your consumer proposal, your protection will remain in place.

Once you receive your discharge from bankruptcy or successfully complete your proposal, the stay will end.

However, you will no longer need the protection of the stay.

The reason for this is your debts will be discharged and there will be no basis for a lawsuit or collection on these discharged debts.

When you file bankruptcy or make a consumer proposal your Licensed Insolvency Trustee receives a “Certificate of Authority.”

This action will start the automatic stay of proceedings.

What Actions Does The Stay Order Stop?

Your bankruptcy filing will provide bankruptcy protection from all forms of creditor action against you, regardless of the stage of the collection action is in.

Stopping collection calls through the stay order is often a major advantage of filing bankruptcy.

The benefits of the stay order include:

  • The stay of proceeding stops a wage garnishment;
  • A stay ends all collection calls;
  • All threatening legal actions will be stopped;
  • All court actions related to your debt included in the bankruptcy will be stopped;
  • Stopping any lawsuits and judgments against you.

Commonly, the stay of proceeding stops a wage garnishment and collection calls.

What Does It Not Accomplish?

The Stay of Proceeding will not stop actions relating to debts not included in the bankruptcy.

Debts that cannot be included in bankruptcy are secured debts, alimony payments, child support payments, debts that were incurred from fraud, Court ordered fines and certain other debt.

Therefore, your automatic stay of proceedings in the bankruptcy does not stop child or spousal support payments.

Your stay will terminate when you receive your bankruptcy discharge, or when you complete your consumer proposal.

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Contact a Licensed Trustee for a Free Debt Relief Evaluation

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Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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