The Automatic Stay for New York City Bankruptcy Filers

Filing a bankruptcy petition in New York City triggers the automatic stay the instant the clerk time-stamps the case. The stay is an injunction created by 11 U.S.C. § 362(a). It stops most collection activity against you and your property without a hearing, without advance notice to creditors, and without a judge signing an order. For filers in the Southern and Eastern Districts of New York, the stay is usually the first concrete relief bankruptcy delivers.

What the Automatic Stay Stops

Section 362(a) lists eight categories of conduct that must cease. For a New York City debtor, the practical effects are these:

• Wage garnishments: An income execution served on your employer under CPLR 5231 must stop. Your attorney sends the notice of filing to the city marshal or county sheriff and to your payroll department. Wages earned after the petition date belong to you.
• Bank restraints: A restraining notice under CPLR 5222 freezes your account. Once the petition is filed, the judgment creditor must release its hold on funds that are property of the bankruptcy estate. What you ultimately keep depends on the exemptions you claim.
• Civil Court and Supreme Court collection cases: Pending lawsuits are frozen. A creditor cannot take a default judgment against you after the filing date, and any judgment entered in violation of the stay is void.
• Foreclosure sales: A referee's sale of your house, condominium, or the shares tied to your co-op apartment is cancelled. The lender must either wait or ask the bankruptcy court for permission to proceed.
• Collection calls and letters: Creditors and debt buyers must stop contacting you about pre-petition debts. Communication goes through your attorney.
• Utility shutoffs: Under 11 U.S.C. § 366, Con Edison, National Grid, and other utilities cannot terminate service because of a pre-petition balance during the first 20 days after filing. After that they may demand a reasonable deposit, but they cannot refuse service because of the old debt.
• Vehicle repossession: A lender cannot take your car. If the car was repossessed shortly before filing but not yet sold, the lender generally must return it.

A Worked Example: Stopping a Garnishment

Suppose a credit card judgment creditor serves an income execution on your employer in the Bronx. Ten percent of your gross pay is being withheld, and the next payday is Friday. You file a Chapter 7 petition on Wednesday at 2:00 p.m. The stay is effective at 2:00 p.m. Wednesday. Your attorney faxes the case number and filing stamp to the marshal and your payroll office the same afternoon. Friday's paycheck should be issued without the deduction. If payroll has already processed the check, the creditor must refund any amount withheld from wages earned after the filing date.

Evictions in NYC Housing Court

The stay treats residential evictions differently from other collection actions. If your landlord has not yet obtained a judgment of possession when you file, the Housing Court case is stayed like any other lawsuit. If the landlord already holds a judgment of possession, 11 U.S.C. § 362(b)(22) says the stay does not apply to the eviction, subject to one procedure.

Under § 362(l), you can preserve the stay for 30 days by doing two things with your petition: filing a certification that New York law allows you to cure the rent default after judgment, and depositing with the bankruptcy clerk the rent that will come due during the 30 days after filing. New York law does permit a cure before the warrant is executed under RPAPL § 749(3), so the certification is available. To keep the stay beyond 30 days, you must file a second certification within that 30-day window stating that the entire default has been cured. The landlord may object to either certification, and the court must hold a hearing within 10 days. Miss the deposit or the deadline and the landlord may proceed. Tenants in public housing face additional rules, which are covered on our NYCHA residents and bankruptcy page.

Section 362(b)(23) also lets a landlord continue an eviction based on endangerment of the property or illegal drug use on the premises, after filing a certification and giving you 15 days to object.

What the Stay Does Not Stop

Section 362(b) carves out proceedings that continue regardless of a bankruptcy filing:

• Criminal cases: Under § 362(b)(1), a prosecution in Criminal Court or Supreme Court continues, including restitution orders.
• Child support and spousal maintenance: Under § 362(b)(2), Family Court can establish, modify, and enforce support orders, and support can be collected from property that is not part of the bankruptcy estate. Income withholding for current support continues.
• Tax audits and assessments: Under § 362(b)(9), the IRS and the New York State Department of Taxation and Finance can audit you, issue a notice of deficiency, and assess tax. They cannot levy your bank account or wages while the stay is in effect.
• Government regulatory enforcement: Under § 362(b)(4), agencies exercising police powers continue. The Department of Buildings can still prosecute code violations, and the Taxi and Limousine Commission can still act on a license.
• Debts you incur after filing: The stay covers pre-petition claims only. Rent, utilities, and credit obligations that arise after the filing date are collectible.

Repeat Filers: Limited or No Stay

Congress restricted the stay for people with recent dismissed cases. Under § 362(c)(3), if you had one bankruptcy case dismissed within the year before the new filing, the stay expires 30 days after the petition date unless you file a motion to extend it and the court holds a hearing and grants the motion within those 30 days. You must show the new case was filed in good faith. Under § 362(c)(4), if two or more cases were dismissed within the prior year, no stay arises at all. You may move within 30 days to have the court impose a stay, again on a showing of good faith.

For example, a Queens homeowner whose Chapter 13 case was dismissed in March for missed plan payments files a new case in September to stop a foreclosure sale. The stay protects the house for 30 days only. The attorney must file a motion to extend and have it heard before day 30, with evidence such as a new job or resolved medical issue explaining why this case will succeed.

Creditor Motions for Relief From the Stay

A secured creditor can ask the court to lift the stay under § 362(d). The two common grounds are cause, including lack of adequate protection, and the debtor's lack of equity in property that is not needed for an effective reorganization. In a Chapter 13 case, a mortgage lender or co-op board typically moves when post-petition payments fall behind. Under § 362(e), the court must hold a preliminary hearing within 30 days of the motion or the stay terminates by operation of law. Co-op shareholders face particular issues with maintenance arrears and the proprietary lease, discussed on our co-op apartments and bankruptcy page.

The Co-Debtor Stay in Chapter 13

Chapter 13 adds a second stay under 11 U.S.C. § 1301. It bars creditors from pursuing a co-signer on a consumer debt while your case is pending, as long as your plan proposes to pay that debt. If a parent co-signed your car loan, the lender cannot call or sue the parent unless the court grants relief. Chapter 7 offers no co-debtor protection.

What Happens When a Creditor Violates the Stay

Under § 362(k), an individual injured by a willful stay violation recovers actual damages, costs, and attorney's fees, and may recover punitive damages in appropriate cases. A violation is willful when the creditor knew of the bankruptcy and acted anyway. Keep every letter, voicemail, and bank statement. Note the date and time of each contact. Your attorney can bring a motion in the bankruptcy court to enforce the stay and recover damages.

How Long the Stay Lasts

Under § 362(c)(1) and (2), the stay protects estate property until that property leaves the estate, and protects you personally until the case is closed, dismissed, or a discharge is entered, whichever comes first. In a typical Chapter 7 case in the Eastern or Southern District, discharge enters about 60 days after the meeting of creditors, roughly three to four months after filing. At that point the discharge injunction under § 524 replaces the stay and permanently bars collection of discharged debts. In Chapter 13, the stay generally continues through the three- to five-year plan.

Getting the Stay in Place Quickly

Because the stay takes effect at filing, timing matters when a sale, warrant, or garnishment is imminent. A skeleton petition can be filed with the petition form, the creditor mailing list, the statement of Social Security number, and the credit counseling certificate. The remaining schedules and statements are due within 14 days under Fed. R. Bankr. P. 1007(c). Our emergency bankruptcy filings page explains what we need from you to file the same day.

You can contact the Law Offices of Albert Goodwin by phone at 212-233-1233 or by email at [email protected].