Bankruptcy’s Automatic Stay of Proceedings

A Stay of Proceedings goes into effect as soon as a bankruptcy or proposal is filed.  It will stop any collection action including a wage garnishment. The stay of proceedings also prevents your creditors from contacting you and stops interest from accruing.


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

The Stay of Proceedings 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 of proceedings 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. As long as you are in bankruptcy or you are completing your consumer proposal, your protection through the stay of proceedings will remain in place.

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

However, you will no longer need the protection of the stay of proceedings. 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 a Stay of Proceedings 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 of proceedings is often a major advantage of filing bankruptcy.

The benefits of the stay of proceedings include:

  • The stay of proceeding stops a wage garnishment;
  • A stay of proceeding 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 An Automatic Stay Of Proceeding 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 of proceedings will terminate when you receive your bankruptcy discharge, or when you complete your consumer proposal.

To learn more about an automatic stay of proceedings please contact your local bankruptcy expert today.

Facebook Comments