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.)
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.
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:
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.
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.
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.