Your road to better creditThe automatic stay stops most collection efforts during your bankruptcy. But the stay is not absolute – creditors can ask the bankruptcy court to remove the stay, called lifting the automatic stay. If successful, the creditor can continue its collection efforts against you.
Read on to learn how creditors can lift the stay, when they might ask the court to lift the stay, and more.
What Is the Automatic Stay?
The automatic stay prohibits creditors from collecting from you while your bankruptcy case is proceeding. It takes effect immediately upon filing the bankruptcy case (that’s why it’s called automatic), and it stops (stays) collection action on pre-bankruptcy debts. The intent is to give you a breathing spell from creditor harassment while you develop a plan to reorganize your finances.
The automatic stay is both broad and powerful. Since it only has a few narrow exceptions, creditors must tread very carefully during a bankruptcy case or risk violating the court’s injunction.
(To learn more about the automatic stay, see the articles in our Bankruptcy’s Automatic Stay area.)
Asking the Court to Remove the Stay: Motions to Lift the Stay
If a creditor wants to continue to collect from the debtor during the bankruptcy, it can seek permission directly from the court to do so, known as “lifting” or getting “relief from” the automatic stay. The creditor must do this by filing a “motion” with the court.
Motions to lift the stay are not as common as one would think. When a creditor files a motion to lift the automatic stay, the debtor is entitled to notice and a hearing. The burden is on the creditor to convince the bankruptcy court that there is a very good reason to lift the stay, and the court is predisposed to continue the bankruptcy protection. For instance, the court will not lift the stay when an unsecured debt will be included in the debtor’s discharge.
When a Court Might Lift the Automatic Stay
Can credit repair help you in Colorado to achieve financial stability? Companies that claim they can restore your credit and quickly erase debt are a dime a dozen. But beware! Many of these services will do little or nothing to improve your credit.
If you need to repair your credit or consolidate debt, you can arrange payment plans and improve your credit score yourself for little or no cost. Make sure you don’t get duped.
If you can’t pay your bills:
Contact a nonprofit credit counseling service in your area.
Contact your creditors immediately to arrange a payment plan.
Questions to ask credit repair companies:
How much do your services cost?
What do you offer that I can’t do myself?
What proof will you provide that you are negotiating with my creditors?
What are your cancellation and refund policies?
Are you in compliance with the Ohio Debt Adjusters Act?
Tips to improve your credit score:
Always pay on time.
Don’t take on new debt to pay old debt.
Keep balances at 30 percent or less of available credit.
Get your free credit report at www.annualcreditreport.com.
Correct mistakes on your credit report by notifying the appropriate credit reporting company in writing.
Don’t close old accounts; a longer credit history improves your score.
Demonstrate your ability to handle various terms and conditions of credit by having a good mix, including revolving loans (such as credit cards), installment loans (such as auto loans), and mortgage loans (such as home loans).
Apply for and open new lines of credit only when you need them.
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