When you file bankruptcy, the automatic stay puts a stop to most collection actions against you or your property. Your creditors don’t even have to know about the stay for it to take effect.
The automatic stay halts foreclosures, lawsuits, or wage garnishments. The purpose of the stay is to help you keep your property and give you a break from collection actions so you can figure out the next best step.
When can a creditor get the stay lifted “relief”?
In order to get “relief” from the stay, your creditor or creditors must convince the bankruptcy judge that there is a good reason for granting it.
Reasons your creditor may use include showing that their interest in the collateral property isn’t “adequately protected” (meaning you have no way of keeping up payments), or showing that you have no equity in your property and that it isn’t of any value in a reorganization plan.
Usually, it’s your secured creditors who want a relief from the stay so they can foreclose on your house or repossess your car. If you don’t have any equity in the property, or lack insurance on it, creditors are more likely to be granted relief from the stay.
If your creditor is trying to sue you along with other parties for nonpayment of a debt, they might ask for relief so that you can be included in the lawsuit – something that can’t happen with the stay in place. Judges vary in their treatment of this type of case – some will choose to leave you under bankruptcy protection, and others will grant relief with some restrictions.
If your creditor gets a relief from stay, it doesn’t give them ownership of your property – it merely allows them to proceed as if you had not filed bankruptcy, with a foreclosure or repossession.
This sounds worrisome. How can I know the automatic stay will really help me?
An experienced bankruptcy lawyer can go over your situation with you and determine how vulnerable you are to a relief of stay. ◊ It’s free to chat with me about your options – you can call or text me at 215.551.7109, or drop me a line.
