A motion for relief from the automatic stay is filed by a creditor as a way of asking for permission from the court to collect on the debt by seizing assets – for example, repossessing a car or foreclosing on a house. Once this process is in place, the “automatic stay” takes effect. This means no creditor can try to collect a debt without first contacting the court for permission. If the automatic stay is ignored, the creditor risks being held in contempt of court.
A motion for relief is most often filed by car and mortgage lenders and is heard about a month after being filed. A bankruptcy judge will grant the motion if the debtor has been neglecting to pay the loan without suggesting a Chapter 13 repayment plan to catch up on payments.
Why do creditors make these motions?
There are a number of reasons a creditor might file a motion for relief. However, the most common one is because the debtor filed for Chapter 7 or Chapter 13 bankruptcy without the intention of using it to keep their car or house. The petition for bankruptcy informs creditors about:
- Any property with a secured loan against it
- Which property the debtor wishes to pay for to keep it
- Which property is to be discharged
What do I have to do?
The next step depends on whether collateral is being kept or surrendered. Should the debtor wish to keep it, he must continue to pay the loan as normal. If he is behind on payments, he should contact his lawyer about arranging a payment plan with the creditor.
In the event the debtor does not want to hold on to the property, he only needs to tell his attorney, who will then inform the court that the motion for relief is not going to be contested. At this point, the creditor will be given permission to seize these assets.
Some creditors will try to file a motion for relief even if the debtor is current on the loan. Should this happen, or if you have been served with a motion and do not know what to do, please consider contacting our law offices for a free evaluation of your case.