How creditors can remove the automatic stay protectionChapter 7 Bankruptcy
Chapter 7 is a liquidation bankruptcy designed to wipe out your general unsecured debts such as credit cards and medical bills. To qualify for Chapter 7 bankruptcy, you must have little or no disposable income. If you make too much money, you may be required to file a Chapter 13 bankruptcy (discussed below).
When you file for Chapter 7 bankruptcy, a trustee is appointed to administer your case. In addition to reviewing your bankruptcy papers and supporting documents, the Chapter 7 trustee’s job is to sell your nonexempt property to pay back your creditors. If you don’t have any nonexempt assets, your creditors receive nothing. As a result, Chapter 7 bankruptcy is typically for low-income debtors with little or no assets who want to get rid of their unsecured debts.
Can credit repair help you in Oregon to achieve financial stability? The 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
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