Creditor Collections After Filing Bankruptcy

When a bankruptcy is filed the automatic stay is immediate, but not unlimited.  The automatic stay typically lasts until the debtors discharge but through the filing of a motion for relief from the stay, a creditor can request permission from the court to continue collection efforts against a debtor. For example, a mortgage company can ask for relief to foreclose on a homestead for non-payment of the mortgage or a vehicle lender can request relief to repossess a vehicle for failure to keep the vehicle properly insured. The creditor must show the court that a reason or a cause exists to lift the automatic stay.

Courts will consider several elements to determine whether or not to grant the creditor’s motion to lift the stay including: if the collateral is properly insured, if the collateral is being properly cared for, if the client is making the required monthly payments, or if the collateral is diminishing in value. The creditor has the right to protect their collateral and if the client is not maintaining and securing the collateral properly the creditor has the right to motion the court for relief. 

If the creditor’s motion for relief from the automatic stay is granted, the creditor can then proceed with the collection efforts against the collateral. The creditor can repossess or foreclose on the collateral, but can only pursue collections against the specific collateral listed in the motion, any other collection efforts would be a violation. 

A court may deny a creditor’s motion for relief, and the automatic stay would then remain in effect so the creditor would not be able repossess or foreclose. However, if the debtor provides the creditor with cause, the creditor can again file a motion for relief from the automatic stay. 

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While the bankruptcy does offer protections to bankruptcy filer, creditors can request the court lift those protections if the creditor is able to show cause to lift the stay.   Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com and let us help you get your life back.