An automatic stay goes into effect when you file for Chapter 7 or Chapter 13 bankruptcy. The stay stops most creditors from calling you, writing to you, or suing you while your bankruptcy case is pending or moving forward. The purpose of the stay is to give you an opportunity to plan for your financial future, without having to deal with the stress and annoyance of creditor harassment. There are only a few exceptions to the stay, and most creditors must be careful not to violate it. However, some creditors will file a motion for relief from stay so that they can continue their collection efforts. An experienced bankruptcy attorney at Grainger Legal Services can help Alabama residents fight these motions while they reorganize their finances.
Creditors that want to continue their collection efforts must file a motion with the bankruptcy court to get the stay lifted and obtain “relief from the stay.” The motion has to show cause for lifting the stay, and it must be accompanied by admissible evidence. For example, if a car lender asks the stay to be lifted with regard to a secured claim, the motion must include documents supporting the existence of a valid security interest, as well as documents showing why the stay should be lifted. Once the motion is filed, you are entitled to a hearing where both you and the creditor can present arguments as to why the stay should remain in effect or be lifted. At all times, the burden is on the creditor to prove that there is good cause to grant it relief from the stay. In general, courts favor the stay.
Why would a creditor ask for relief from the stay? Creditors with a security interest, such as mortgage holders or car lenders, may request relief from the stay if you stop making payments or the collateral is inadequately protected. An example of inadequate protection is failure to obtain and maintain liability insurance for a car. Usually, items used as collateral for a secured loan must be paid for during bankruptcy. Therefore, the court may lift the stay if a debtor falls behind after the case is filed and cannot bring payments current or present some other good cause to deny the motion. For example, a Chapter 13 plan can help you get caught up on missed house payments but will only work to protect the house so long as both the future house payments and the plan payment are being made. If both are not made after the filing of the case, the mortgage company may file a Motion for Relief from Stay in order to proceed with foreclosure.
Unsecured creditors may also request relief from an automatic stay. These requests are granted primarily when an unsecured debt is not dischargeable or to go after a co-debtor who co-signed on the debt that is not being paid in full in the plan. Landlords also sometimes seek relief from the stay so that they can evict a tenant for not paying rent.
The purpose of filing for bankruptcy is to obtain a fresh financial start. One of the great benefits is the automatic stay, which permits a debtor time and space to be free of creditor harassment and plan for a new and better future. Often, creditors do not face a significant enough loss to challenge an automatic stay. However, when creditors do file a motion for relief from the stay, they are usually represented by experienced attorneys who can advocate aggressively on their behalf of their interests. It is important to have a knowledgeable lawyer on your side when you are pursuing Chapter 13 or another type of bankruptcy. Grainger Legal Services represents clients in South-Central Alabama from our offices located in Montgomery, Prattville, and Troy. Call us at (334) 260-0500 or contact us online to schedule a free consultation.