Motion To Lift The Automatic Stay

People filing for bankruptcy would ask what is motion to lift the automatic stay to know its ramifications to their financial status. Even before filing, an individual should understand what this situation is and what can debtors do in this case.

Motion To Lift The Automatic Stay

Understanding Automatic Stay and the Motion

Understanding the motion to lift the automatic stay starts by knowing automatic stay. Automatic stay is the instance when creditors’ acts of collecting debt payments. This motion will be effective after filing for bankruptcy. Debtors’ assets will be protected through automatic stay while giving a time to adjust their finances and reorganize payment plans.

On the other hand, the motion to lift automatic stay means creditors will continue to collect money from debtors, which means automatic stay won’t be in effect. Creditors, however, can’t pursue collection by imposing it themselves. They must search court approval before this motion can be lifted. Once this is filed, the debtor will receive a notice for court appearance. When attending court hearings, the creditors are the ones who will need to prove why lifting automatic stay is necessary.

Instances when Creditors can File for this Motion

There are several instances when creditors can file for this motion. Among the common reasons are outstanding balances on mortgage, car loans, and other loans that people often obtain. Therefore, credit standing may give creditors reasons to file for lifting automatic stay.

Another reason is if debtors’ bankruptcy files indicate voluntary surrendering properties and other assets like cars and houses. This gives creditors grounds to go after debt collection.

Someone who have been repaying under Chapter 13 bankruptcy, but had delayed creditors’ payment will also drive creditors to collect the debt. This is another instance when people need to pay debts and bills on time to stay protected with automatic stay.

Another instance is when landlords want to evict the debtor due to non-payment of rent. There are still other instances, but these are the common reasons why creditors file for lifting automatic stay.

Instances when the Court will Approve the Motion

Since the creditors are the ones filing for this motion, the burden shifts to them in proving that the motion should be lifted. This means that the court may or may not approve of lifting the motion. There are several instances, however, where the court may approve the motion to lift the automatic stay.

A common reason is an unsettled secured debts. Secured debts are the loans obtained with an asset serving as collateral. A debtor who has not been paying his collateral debt or if the property is insufficiently protected will prompt the court to approve the motion.

Insufficient protection refers to the collateral’s lack of insurance or if it is insufficient enough to guarantee payment from the debtor. Once approved, secured debt creditors can start following up on the payment.

Unsecured loan providers may also file to lift this motion if the debt won’t be included in the bankruptcy discharge. Examples are spousal and child support.

Overall, filing a motion to lift the automatic stay grants creditors the right to pursue debt collection despite filing for bankruptcy. However, creditors will only do so if approved by court. Debtors must be prepared in case of this scenario and start checking out their finances to see if creditors will have grounds to lift this motion.