The Automatic Stay in New Jersey Bankruptcy in NJ — Bankruptcy Legal Guide | CGMIMM

## The bankruptcy automatic stay in New Jersey When you file bankruptcy, the **automatic stay** (11 U.S.C. § 362) takes effect IMMEDIATELY. It legally halts most creditor activity — giving you breathing room to reorganize or liquidate. ## What the stay stops **Generally stayed:** - Lawsuits to collect debts - Wage garnishments - Bank account levies / freezes - Tax levies (most) - Foreclosures (judicial and non-judicial) - Repossessions - Eviction proceedings (with limits) - Phone calls / mail / collection efforts - Civil judgment enforcement - Lien enforcement - Setoffs from bank accounts **Important:** the stay applies to creditors of the DEBTOR. Co-debtors (cosigners, guarantors) are NOT protected — except in Chapter 13, which has a separate **co-debtor stay** (§ 1301). ## What's NOT stayed **Major exceptions** (§ 362(b)): - **Criminal proceedings** — not stopped - **Domestic support actions** — child support, alimony enforcement continues - **Paternity proceedings** - **Withholding of income for support** - **Government regulatory / enforcement actions** - **Tax assessments / audits** (collection paused; assessment continues) - **Eviction after pre-petition judgment** (in some states / scenarios) - **Termination of expired lease** - **Securities transfer of stocks / bonds** - **Some divorce proceedings** ## How long the stay lasts **First-time filers:** - Stay continues until case dismissed, closed, or discharge entered - Chapter 7: typically 3-6 months - Chapter 13: 3-5 years (length of plan) **Repeat filers (within 1 year of dismissed case):** - Stay terminates 30 days after filing UNLESS extended by court motion within 30 days - Court will only extend if filer shows good faith **Three or more filings within a year:** - NO automatic stay (§ 362(c)(4)) - Court can impose stay only on motion within 30 days + evidence of good faith ## Relief from stay Creditors can file a **motion for relief from stay** (also called "motion to lift stay"): **Common grounds:** - **Cause** — including lack of adequate protection (mortgage payments not being made) - **No equity in property + property not necessary for reorganization** - **Single asset real estate** with no equity - **Bad faith** filing **Common scenarios:** - Mortgage lender wants to foreclose (debtor not making payments) - Auto lender wants to repossess - Landlord wants to evict - Personal injury plaintiff wants to litigate (with bankruptcy court approval) **Process:** - Creditor files motion in bankruptcy court - Hearing within 30 days of motion (per § 362(e)) - If court doesn't rule within 30 days, motion granted automatically - Debtor can negotiate adequate protection ## Violations of the stay **Willful violations** by creditors result in: - **Actual damages** — lost wages, fees, expenses caused by violation - **Attorney's fees** in pursuing violation - **Punitive damages** in egregious cases (§ 362(k)) - **Sanctions** by bankruptcy court Violations include: - Continuing collection calls / mail - Repossession after notice of bankruptcy - Filing / continuing lawsuits - Recording liens - Disconnecting utilities (with timing exceptions) - Reporting to credit bureaus as collecting ## Notice to creditors When you file, list ALL creditors. Court sends them notice — but creditors may not actually update their systems for weeks. **Best practice:** - Get bankruptcy case number ASAP - When creditors call, give them case number, attorney name, and case court - Send written notice to creditors of bankruptcy - Document every contact attempted after notice ## Co-debtor stay (Chapter 13) **11 U.S.C. § 1301** protects co-debtors of consumer debts: - Applies in Chapter 13 (not Chapter 7) - Halts collection against co-debtors - Doesn't apply to business debts - Creditor can move for relief if co-debtor received the consideration ## Practical effects **Day 1 of bankruptcy:** - Wage garnishment must STOP - Bank levy released - Foreclosure sale postponed - Repossession halted - Lawsuits paused - Phone calls supposed to stop **Within days/weeks:** - Federal tax levies released (with paperwork) - Court records updated - DMV releases vehicle holds - Utilities can't disconnect (within reasonable security deposit terms) **Continuing obligations:** - Current mortgage / car payments must be made (or face stay relief) - Current utility bills - Domestic support - Tax filings still required ## When the stay is most powerful - **Day before foreclosure sale** — Chapter 13 stops sale, lets you cure arrears - **During wage garnishment** — funds garnished after filing must be returned - **Active lawsuits** — pause cases, often resolved through bankruptcy - **Tax levies / collection** — stops most IRS / state collection ## When the stay is limited - **Repeat filers within a year** — limited or no stay - **Bad-faith filings** — quickly lifted - **In rem orders** — court can extend protection beyond debtor - **Single-asset real estate** — quick path to lift stay ## What you should do If you're considering bankruptcy in New Jersey: the automatic stay is one of the most powerful protections in U.S. law — but it has limits and exceptions. Talk to a New Jersey bankruptcy attorney before filing, especially if you've filed before recently. Most offer free initial consultations and can advise on stay strategy. --- *This guide is general information about federal bankruptcy law as of early 2026 and is not legal advice. The automatic stay has technical exceptions. Talk to a licensed New Jersey bankruptcy attorney about your specific situation.*