I have a Babylock as well and it did the same as yours. Apparently the machine does not have a cover inside to protect the thread from wrapping around some part. When I took my machine in to have it repaired the owner of the store told me that I should use a good quality of thread but if I was using a less expensive where the thread is being pulled out from under the sticky lable to take a fingernail file and file the opening down and that keeps the thread from catching in the opening and breaking so it won't get caught in the machine. My machine did not break threads so I could not tell that it was catching the thread until it completely locked up. The repair was about $70.00 but it was a lesson well learned.
Good luck you will love the machine. It does the work for you.
pat thompson