When Can a Creditor Lift (Get Rid Of) the Automatic Stay?

Some collection actions are not stopped by bankruptcy's automatic stay. And sometimes a creditor can ask the judge to lift (remove) the stay.

The automatic stay requires creditors to immediately stop collection efforts against you once a bankruptcy case is filed. However, there are certain circumstances where a creditor may ask the court to remove the protection of the automatic stay so that it can resume collection efforts against you. This is referred to as lifting the automatic stay. In limited circumstances, the stay may not kick in at all or may last for only a short period of time.

(To learn more about how the automatic stay works, see Bankruptcy's Automatic Stay.)

What Is the Automatic Stay?

The automatic stay goes into effect the moment that you file a bankruptcy case. It protects you and your property from creditors. This means that your creditors must immediately stop all collection efforts such as wage garnishment, vehicle repossession, and home foreclosure. The automatic stay is so broad that creditors can’t even call you or send you a letter without potentially violating this very powerful rule. The automatic stay applies regardless of what type of bankruptcy you file.

When a Creditor Might Request That the Court Lift the Automatic Stay

In some situations, a creditor can ask the court to lift (remove) the automatic stay as to that creditor’s debt. This type of relief is most commonly sought by creditors who have a lien on your property, such as a mortgage or car company. However, any type of creditor has the right to request this relief provided that it has good cause.

Some of the more common situations where creditors may have good cause to file a motion to lift the automatic stay are:

  • You are behind on your home mortgage payments.
  • You are behind on your automobile payments.
  • You fail to maintain insurance on your home or your vehicle.
  • You are in a Chapter 13 repayment plan and have delayed paying your creditors.
  • Your bankruptcy schedules indicate that you would like to voluntarily surrender your home or vehicle.
  • Your landlord would like to evict you due to non-payment of rent.
  • The creditor holds a non-dischargeable debt (one that by law won’t be wiped out in your bankruptcy) and would like permission to collect on the debt. An example of this would be child support, alimony, or criminal restitution.

How Is the Automatic Stay Lifted?

In order to get the automatic stay lifted, the creditor must file a written motion with the court. The motion must explain in detail why the creditor is requesting that the protection of the automatic stay be lifted. You are entitled to notice of the motion and a hearing on the matter. The burden is on the creditor to prove that good cause exists to lift the automatic stay.

The court will decide whether to grant or deny the creditor’s motion. If the court denies the motion, the stay remains in place. If the court grants the motion, the creditor can resume collection efforts against you. For example, if the creditor is a mortgage company it can proceed with foreclosing on your home.

Exceptions to the Automatic Stay

In certain situations the automatic stay never applies to your case or applies only for a short period of time. In particular, this might happen if you have filed for bankruptcy in the previous year.

  • Second bankruptcy filing. If this is the second time that you are filing for bankruptcy within a year, the automatic stay may only apply for thirty days.
  • Third bankruptcy filing. If this is the third time that you are filing for bankruptcy within a year, the automatic stay never goes into effect.

In these situations you can ask the court to instate and extend the stay over the entire life of your case, but you’ll have to show that you filed your current bankruptcy case in good faith.

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