What is the Motion for Relief from Stay?

Creditors can take actions to stop bankruptcy's stay on collection efforts

Once the petition for a Chapter 7 Bankruptcy has been filed, any actions taken by creditors - including telephone collection calls, foreclosure proceedings and lawsuits - come to a halt.

An automatic stay is put in place by the U.S. Bankrupty Court and is intended to stop collection efforts while the petition is being considered.

In some cases, debtors may continue receiving collection notices in the mail or a foreclosure may proceed, and that's a good sign that creditors have taken action of their own - a motion filed with the court for relief from stay.

In effect, it means creditors are asking the court to lift the restraining order against them from collecting on unpaid bills so they may continue with whatever course of action they were pursuing before the bankruptcy was filed.

"If they were in the process of foreclosure of a home or repossession of a vehicle, [a] bankruptcy froze that process. The motion for relief from automatic stay simply allows them to pick up where they left off," according to the BankruptcyLawNetwork.com.

If this should happen to someone in a Chapter 7 case, the website warns them to be particularly mindful of the dates on which bankruptcy filings occur in relation to foreclosure sales. The date when a relief order is signed by a judge should also be noted since these motions are usually granted quickly and leave the debtor little time to react.

That advice is very important because there aren't many defenses that the court will allow against stopping a motion for relief from stay, especially for those filing a Chapter 7 Bankruptcy.

The issues that a bankruptcy attorney can raise include whether the creditor is a party with a direct interest in the debt. For instance, if real estate is involved, do they possess the note or mortgage?

Attorneys may also question whether the creditor followed all local and federal regulations in showing their authority, as well as declarations and exhibits before the court when the motion was filed. In addition, creditors have to properly serve notice to all parties involved in the debt to receive the order lifting the bankruptcy stay.

If those measures fail and the creditor is allowed to continue with their collection or foreclosure, the debtor can look to their state court as another avenue in which they may be able to stop or at least delay the creditor's recovery actions.

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