WHAT IS A MOTION TO LIFT THE AUTOMATIC STAY?

When a Chapter 7 or Chapter 13 bankruptcy petition is filed, the bankruptcy court issues an injunction forbidding/freezing any collection action against the debtor.  This protection is called the "automatic stay" because once the case is filed the injunction happens immediately and automatically.  The automatic stay prohibits telephone harassment, lawsuits, garnishments, and even letters attempting to collect on a debt.  The stay typically continues until the case is dismissed, the debtor receives a discharge, or the bankruptcy court otherwise amends the order.

In some cases a creditor may want the automatic stay amended to allow that creditor the opportunity to proceed with a collection action against the debtor.  To accomplish this, the creditor must file a "Motion to Lift the Automatic Stay" with the bankruptcy court.  This motion is filed routinely when the debtor is not making the required monthly payment on secured property (e.g. a house or car).  The creditor will seek leave from the court to lift the stay to allow the creditor to either foreclose on the home or repossess the collateral.

To succeed in a Motion to Lift Stay, the creditor must show that it has good cause for the request.  Generally lack of payments since the bankruptcy filing will constitute good cause.  Additionally, good cause may exist if the debtor has failed to keep insurance on the collateral.

Defending a Motion to Lift Stay usually boils down to making payments.  Once the debtor is current on the monthly payments the creditor's motion is generally denied.  The debtor may also challenge the creditor's standing.  This may occur when a mortgage is at issue that has changed hands several times.  If the creditor cannot prove to the court that it is the current holder of the promissory note, the bankruptcy court will not consider the creditor's motion.  Finally, the debtor may negotiate a resolution of the issue directly with the creditor.  The debtor pays something and makes additional promises for future payments, and the creditor withdraws the motion.

If you intend toretain secured property after your bankruptcy filing, consult with your attorney and discuss your payment obligations.  The general rule is that "secured property must be paid for or returned."  Making payments after bankruptcy can avoid a Motion to Lift Stay on your property.