The automatic stay prohibits creditors from trying to collect money or property from someone after they have filed for bankruptcy.
Stay means to temporarily stop a legal proceeding by order of the court. The legal proceeding in this context is the collection of a debt. It is called the “automatic” stay because it automatically goes into effect as soon as a bankruptcy petition is filed.
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What Happens If an Automatic Stay Is Lifted?
The bankruptcy court can order to lift the automatic stay. Lifting the stay means that it is no longer in effect. Once the stay is lifted the creditor or creditors can attempt to take possession of the property, they have a lien on.
If the creditor wants the stay to be lifted, they will file a ‘Motion to Lift the Stay’. Sometimes they call it a ‘Motion for Relief from the Stay’ instead. Both mean the same thing.
If a Motion to Lift the Stay is filed, a notice will be sent out giving a deadline for filing a response.
When fighting a Motion to Lift the Stay, you will be more successful if:
- You have some equity in the property,
- Are up to date on the payments,
- Plan to reaffirm the debt (if in Chapter 7)
- Plan to pay for the property in the plan (if in Chapter 13)
If you file a response, there will be a court hearing and the judge will decide whether to lift the stay.
What Happens After the Automatic Stay Is Lifted?
If the automatic stay is lifted, you don’t have to deliver the property to the creditor. However, if the creditor is a mortgage company or auto lender then they can foreclose or repossess the property.
The creditor must still go through the legal process to take possession of the property. They will then auction the property. The money received is applied to the debt owed.
If there is a remaining balance, they may file a proof of claim in your bankruptcy.
How Long Is Automatic Stay in Chapter 7?
The automatic stay typically lasts the entire Chapter 7 case. It goes into effect the moment the petition is filed and remains in effect until either:
- Lifted by the court,
- The case is dismissed, or
- The case is discharged
The automatic stay is no longer needed after a case is discharged because a discharge eliminates the debt. If the creditor tries to collect a debt after discharge, they are violating the discharge order, not the automatic stay.
If you have filed multiple bankruptcy cases within the last year, the automatic stay is temporary and you must file a Motion to Extend the Stay.
How Long Is the Automatic Stay in Chapter 13?
The automatic stay goes into effect as soon as a bankruptcy petition is filed and stays in effect until either:
- The stay is lifted
- The case is dismissed, or
- The case is discharged
The automatic stay lasts much longer in Chapter 13 because a Chapter 13 case takes up to 5 years to complete.
Once a discharge is entered, the automatic stay is no longer needed because the debt has been eliminated. A creditor is violating the discharge order if they try to collect a debt after discharge.
If you have filed multiple bankruptcy cases within the last year, the automatic stay is temporary and you must file a Motion to Extend the Stay.
When Does Automatic Stay Begin?
The automatic stay begins the moment a bankruptcy petition is filed. It automatically goes into effect. There is no separate order creating it.
When Does an Automatic Stay End?
The automatic stay ends in three situations. The court can enter an order lifting the automatic stay. The stay also ends if the case is dismissed or discharged.
If a case is unsuccessful, then it ends in a dismissal. In this situation, the creditor can resume collection proceedings.
If the case is successful, a discharge is entered. A discharge is the elimination of the debt. A creditor cannot pursue collections of a discharged debt.
Some debts are not dischargeable, such as taxes, student loans and child support. If you owe these debts, collections may resume after discharge.
If you need relief from your creditors, you can hire an expert bankruptcy lawyer in Jackson, MS from The Rollins Firm and determine the best course of action.
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