North Carolina bankruptcy automatic stay (11 U.S.C. § 362) immediately halts most collection actions, lawsuits, foreclosures, and wage garnishments the moment a bankruptcy is filed.
Published May 8, 2026
## The bankruptcy automatic stay in North Carolina
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 North Carolina: the automatic stay is one of the most powerful protections in U.S. law — but it has limits and exceptions. Talk to a North Carolina bankruptcy attorney before filing, especially if you've filed before recently. Most offer free initial consultations and can advise on stay strategy.
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*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 North Carolina bankruptcy attorney about your specific situation.*
This guide is for general information only and does not constitute legal advice. Laws change and outcomes depend on your specific situation — talk to a licensed attorney before acting on anything you read here.