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- The automatic stay begins the day the debtor files for bankruptcy. Some people file for bankruptcy to avoid foreclosure, apartment eviction or automobile repossession. However, on certain debts, such as foreclosure, the creditor can ask the bankruptcy court to allow debt collection efforts to continue. The creditor or debt collector makes the request by filing a “motion to lift the automatic stay.” For example, a mortgage company could argue in its motion that a debtor has not paid his mortgage for several months, cannot or will not pay it, and that the court should lift the automatic stay to allow foreclosure.
- Bankruptcy judges rule on individual motions for lifting the automatic stay. A landlord may request a lifting of the stay to evict a tenant who stopped paying rent and then filed for bankruptcy. A credit agency for a car dealer may seek an end to the stay to repossess a car because the debtor is our months behind on the loan. Each creditor or debt collector with a claim against a debtor must file a separate motion for a lifting of the stay.
- Bankruptcy does not solve all debt problems. It does not allow allow people to live in homes without paying the mortgage or to stay rent-free in an apartment. Bankruptcy allows people to eliminate or reorganize certain debts, but it is not possible to keep secured debts such as houses and cars in bankruptcy without continuing to make payments. The automatic stay provides temporary protection for people facing foreclosure or repossession, but creditors get around that by filing for motions to lift the stay.
- A dismissal of the bankruptcy leads to a complete lifting of the automatic stay -- and an end to the bankruptcy application. This allows all creditors to resume debt collection efforts as if the bankruptcy never happened. Dismissal of a bankruptcy is possible because of procedural errors or because the judge or trustee suspects bankruptcy fraud, such as hiding of assets.
Process
Considerations
Misconceptions
Dismissal
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