Can a creditor obtain relief from the automatic stay in a bankruptcy?

When an individual files for bankruptcy, he or she is immediately put under a legal protection referred to as an automatic stay. This automatic stay means that creditors cannot attempt to collect money from the person until the discharge or dismissal of the bankruptcy takes place. A creditor does have the option of appealing to the court and requesting relief from the stay. If granted, this means that they will be allowed to pursue what they are owed even before the bankruptcy process is completed.

When Is Relief From an Automatic Stay Granted?

A creditor can seek relief from the automatic stay in bankruptcy court by filing a motion in the court and persuading the judge to grant relief. An order granting relief from the automatic stay permits a creditor to take certain specified actions to collect a debt against you, which will be spelled out in the order. The relief may include permission to foreclose or repossess, to seek recovery under an insurance policy, to continue an action against you in a state court, and/or other specific permissions.

The creditor has a greater chance of having a judge grant the automatic stay relief if the creditor is able to prove that not getting the debt payments is causing serious detriment to them in some way.  For example if a landlord has a pending action to evict you and it is believed that you are engaging in illegal behavior in the apartment, or if the landlord is unable to pay his mortgage because you are not paying rent, either of these might be examples of a situation where the creditor has a compelling need for an automatic stay.

Getting Help – Bankruptcy Automatic Stay

If you are involved in bankruptcy, either as a creditor or as a debtor, having a lawyer on your side to assist you in dealing with the complexities of the United States Bankruptcy Code is essential.

Case Studies: Relief From the Automatic Stay in Bankruptcy

Case Study 1: Landlord’s Dilemma

In a recent bankruptcy case, a landlord found himself in a difficult situation when his tenant filed for bankruptcy. The tenant had stopped paying rent for several months, leading to financial strain on the landlord who relied on the rental income to cover his mortgage.

Faced with the potential risk of foreclosure, the landlord filed a motion in bankruptcy court seeking relief from the automatic stay. The court granted the relief, allowing the landlord to proceed with eviction proceedings and regain control of the property.

Case Study 2: Credit Card Debt Collection

A credit card company encountered a debtor who had accumulated a significant amount of debt and subsequently filed for bankruptcy. The company faced the challenge of collecting the outstanding debt, which was crucial for its financial stability.

To address this issue, the credit card company filed a motion for relief from the automatic stay. The court carefully reviewed the creditor’s claim and concluded that the debtor’s ongoing default on payments was causing severe financial harm to the company.

Consequently, the court granted relief from the automatic stay, enabling the credit card company to pursue collection efforts outside of the bankruptcy process.

Case Study 3: Mortgage Lender’s Hardship

A mortgage lender faced financial hardship due to a debtor’s failure to make timely mortgage payments. The lender struggled to meet its own financial obligations, including payments to investors and covering operational costs.

Seeking relief from the automatic stay, the lender presented evidence to the court that the debtor’s non-payment was causing substantial harm to their business operations.

The court considered the lender’s arguments and determined that relief from the automatic stay was warranted, allowing the lender to initiate foreclosure proceedings and mitigate their financial losses.