How Automatic Stays Impact Credit Unions (and What You Can Do Next)

A member files for bankruptcy just as your team is preparing to move forward with collections. Activity stops. The account changes overnight. What felt like a clear next step is suddenly paused.

For credit unions, an automatic stay is an immediate shift in how the account is handled, how your team communicates, and what options remain available. Understanding that shift helps you respond in a way that is both compliant and practical. With that in mind, it helps to start with a clear understanding of what an automatic stay is and how it functions.

What Is an Automatic Stay?

An automatic stay takes effect as soon as a bankruptcy case is filed. It pauses most collection activity, including phone calls, letters, lawsuits, repossessions, and foreclosure actions.

The purpose is to give the borrower space to move through the bankruptcy process. For credit unions, it means stepping back from active collection while continuing to monitor the situation and evaluate next steps.

How Automatic Stays Affect Credit Unions

Once the stay is in place, a few things happen at the same time.

• Collection activity must stop. This includes direct outreach, internal collection efforts, and pending legal actions.
• If your credit union holds a secured interest, enforcement actions such as repossession or foreclosure are also paused, even though your underlying rights remain in place.
• Internally, the account often moves from an active collection posture to one that requires closer review, coordination, and documentation.

Actions Credit Unions Can Take

Start with a clear review of the account. Look at the type of debt, whether it is secured, and what steps were already in progress before the filing.

From there, consider whether additional action may be appropriate. In some situations, it may make sense to seek relief from the stay, particularly if collateral is at risk or payments are not being made. In others, the better course is to monitor the case and stay engaged as it develops.

It is also important to make sure your internal teams are aligned. When everyone understands what the stay requires and how the account is being handled, it reduces the risk of missteps and keeps the process consistent.

Local Considerations in Florida and Georgia

While bankruptcy is governed by federal law, state-specific exemption rules can still influence how a case unfolds.

In Florida, certain assets may be protected in ways that affect recovery expectations. In Chapter 13 matters, those same considerations can shape how repayment plans are structured and approved.

Georgia presents its own considerations as well. The state has different exemption rules, procedural practices, and approaches to certain secured interests, all of which can affect strategy and expected recovery depending on the circumstances of the case.

For credit unions operating across Florida and Georgia, these details are part of the broader analysis. They are not always the first issue, but they often become important as the case progresses.

Supporting Credit Unions Through Ongoing Education

Most credit unions are not dealing with a single bankruptcy matter. They are managing these situations on an ongoing basis.

That is why education plays such an important role in how we work with our clients.

At Sorenson Van Leuven, PLLC, we provide ongoing educational support through seminars, webinars, and practical guidance designed specifically for credit union teams. The goal is to help your staff understand what they are seeing, what options may be available, and how to respond in a consistent and informed way.

Start a Conversation With Sorenson Van Leuven, PLLC

An automatic stay may pause action, but it does not remove the need for a clear approach.

If your credit union is working through a current filing, or thinking about how these matters are handled more broadly, we are available to talk through it with you.

A brief conversation can help clarify what you are seeing, what to expect next, and how to approach the situation in a way that aligns with your operations.

If it would be helpful to talk through a current matter or your overall process, you can schedule a brief introductory call with our team.