Once a debtor files for bankruptcy, the collection of debts by creditors are stayed (or in other words, stopped). In order for creditors to continue to collect the money which has been lent to debtors, the creditor must obtain permission from the bankruptcy court to lift the stay. If the creditor is successful, it is able to continue collecting from the debtor.
Request to Lift the Stay
When a debtor files for bankruptcy, the automatic stay is immediately in place. Creditors can seek relief from the stay, but it can only be done by filing a motion to the court.
After the motion to remove the stay is filed, a court hearing will be held. Cause must exist for the stay to be lifted. An experienced bankruptcy attorney can help you understand whether cause exists to lift the stay in your particular case.
Secured Debt and the Automatic Stay
Secured debt is a debt owed that can be recovered by a creditor if there is a default on payments. Examples of secured debt include mortgage and car loans.
A court may decide to lift the stay when a debtor is not making any payments on a secured debt. For example, if a debtor is several months behind on making payments on his home or car, the lender is very likely to request a relief from stay from the bankruptcy court. In these cases, creditors will argue that the likelihood of being repaid is at stake, as there is not sufficient protection on the debt to ensure repayment. This may lead to foreclosure or repossession of a vehicle. It is common for a lender to seek relief from the stay to continue with foreclosure proceedings or to repossession a vehicle.