Written by Craig D. Robins, Esq.
When you file for bankruptcy relief, a very powerful federal law immediately goes into effect, called the automatic stay. This is the law which makes it illegal for creditors to take any action of any kind to collect a debt. This is how you get debt relief when you file for bankruptcy.
It is against federal law for creditors to violate the stay. This means that any litigation comes to a grinding halt. However, in certain situations, creditors have the right to ask to bankruptcy court to “lift the stay” which is done in a “motion for relief” from the stay.
Under What Circumstances Do Creditors Bring Motions to Lift the Bankruptcy Stay?
Motions for relief are often brought by mortgage companies and lenders when a homeowner files for Chapter 7 bankruptcy relief and is behind on the mortgage.
Automobile lenders also bring such motions when debtors are in arrears on car loans.
In Chapter 13 bankruptcy cases, lenders bring such motions when the debtor fails to stay current with post-petition obligations.
If the Court grants a motion for relief, it enables the creditor to continue where it left off in its efforts to collect on a debt or foreclose on a house.
When Are Motions For Relief Brought In Typical Consumer Bankruptcy Cases?
Although some creditors will rush to file a motion for relief from stay within days of the bankruptcy filing, most creditors do not act that fast.
In a typical Chapter 7 case, even if the debtor is extremely behind with mortgage or car loan payments, it will often take the lender 30 to 60 days before bringing such a motion.
How Long Does It Take for the Bankruptcy Court to Grant Relief from the Stay?
Once a motion for relief is brought, the debtor must be given the opportunity to defend the motion. Thus, the hearing on the motion will usually not occur until several weeks after the motion is brought.
If the debtor does not defend the motion, which is usually the case, the court will grant the motion. However, some bankruptcy court judges will not sign the order lifting the stay until the creditor serves (“settles”) a proposed copy of the order on the debtor and the debtor’s attorney.
Creditors Held to Strict Requirements When Bringing Motions for Relief from Stay
Most bankruptcy courts, including ours on Long Island, have stiff rules that creditors must adhere to when bringing a motion for relief. If they do not, the Court will either dismiss the motion or adjourn the hearing.
Up until recently, most creditors had a much easier time of bringing motions for relief, as many bankruptcy judges permitted them to do this on a “Notice of Presentment” — a method of getting the order granting the motion without having to show up in court if the debtor didn’t put in a defense.
However, most bankruptcy court judges in our jurisdiction have begun to require creditors to show up in court on motions for relief, and no longer permit them to seek relief through a Notice of Presentment.
Defending Motions for Relief from Stay