The automatic stay can be lifted. Upon the filing of a bankruptcy case, an automatic stay goes into effect, barring creditors’ rights to collect on their debts or realize on any collateral securing those debts. It is broad, immediate, and applies without any court order. The stay is also temporary, and when the debtor stops performing, we move to have it lifted.
Stay Relief in Chapter 7 Cases
A request for stay relief is less common in a Chapter 7 case than in a Chapter 13 case. In a Chapter 7 case, the debtor either surrenders the collateral, in which case the stay terminates as to that asset and the creditor can proceed with foreclosure or repossession, or the debtor reaffirms the debt in order to keep the collateral. Reaffirmation is described on the Reaffirmation Agreements page in this section.
In a Chapter 7 case where the debtor has no equity in the property and no genuine reorganization is occurring, stay relief is typically straightforward to obtain.
Stay Relief in Chapter 13 Cases
In a Chapter 13 case, a debtor can include pre-petition mortgage arrears in the plan and pay them off over the plan term, typically up to 60 months. This is the most common reason debtors file Chapter 13: to stop a pending foreclosure and catch up on what they owe.
However, a debtor must remain current on post-petition mortgage payments after the bankruptcy is filed, or risk a creditor obtaining relief from the automatic stay. The typical situation that triggers a stay relief motion involves a debtor who becomes delinquent on the payments on their principal residence after the case is filed, usually two or more consecutive missed payments under the existing loan documents with the creditor.
Upon that default, the creditor may file a motion with the bankruptcy court seeking to lift the stay to allow foreclosure to proceed.
The Typical Resolution: The Agreed Order
The typical resolution to a stay relief motion in a Chapter 13 case is for the creditor and debtor to enter into an agreed order filed with the bankruptcy court. Such an agreement requires that the debtor resume the regular monthly installment payments required by the loan documents and make up the default amount, including attorney fees incurred by the creditor, over an agreed period, typically three to six months.
The agreed order also gives the creditor remedies to terminate the stay upon any further default by the debtor under the terms of the agreement, typically without requiring a new hearing, unless the debtor cures within a short response window.
Bankruptcy courts insist on these agreements because the property in question is usually the debtor’s principal residence. Courts are reluctant to lift the stay without allowing a debtor one more opportunity to cure, but they will lift it when the debtor fails to perform.
Serial Filers and In Rem Stay Relief
Some debtors file bankruptcy repeatedly, sometimes three or four times, affecting the same property primarily to invoke the automatic stay and stop scheduled foreclosure sales, with no genuine intent to reorganize. This is one of the most frustrating situations a creditor faces.
When the pattern is present, we evaluate seeking what is called in rem stay relief, an order that runs against the property itself for two years, not only the case in front of us. An in rem order recorded in the county deed records means that if the debtor files another bankruptcy within that period, we can proceed with the foreclosure without filing a new stay relief motion in the new case. We also evaluate moving to dismiss bad-faith filings, which can result in the debtor being barred from refiling for 180 days or longer.
Related: Serial Bankruptcy Filers, for when a debtor files repeatedly to delay foreclosure and we seek in rem stay relief. See also Adequate Protection, for when your collateral is losing value during the bankruptcy case.
In this section: Proof of Claim · Automatic Stay Relief · Reaffirmation Agreements · Plan Negotiation
Frequently Asked Questions
How quickly can stay relief be obtained after the debtor files bankruptcy?
With an experienced bankruptcy creditor attorney, a stay relief motion can typically be filed within one to two weeks of the bankruptcy filing, once we have confirmed the case details. The court usually schedules a preliminary hearing within two to four weeks. In emergency situations, when the collateral is being actively damaged or stripped, we request expedited hearings.
What if the debtor keeps filing new bankruptcies every time we get close to the sale date?
This is the serial filer problem, and it is exactly what in rem stay relief is designed to address. Once we obtain an in rem order and record it in the county deed records, it binds all future bankruptcy cases involving that property for two years. We have obtained these orders for clients dealing with exactly this pattern.
Can the debtor stop a stay relief motion by making the missed payments?
Yes. In most cases the debtor can moot a stay relief motion by curing the specific post-petition default before the hearing. That is why courts often resolve these motions through an agreed order rather than outright stay relief. The agreed order gives the creditor automatic remedies upon any further default, which strengthens the creditor's position going forward.
What is adequate protection and how does it relate to stay relief?
Adequate protection is a related but separate remedy. When the collateral is declining in value while the bankruptcy is pending and the debtor is not making payments, the creditor may be entitled to require the debtor to make periodic cash payments to compensate for the decline. We sometimes file for adequate protection simultaneously with a stay relief motion when the collateral is depreciating.
What if the debtor's attorney files for an extension of the stay?
In some cases the automatic stay expires or is limited in repeat filings, but the debtor can move to extend it. We monitor these motions and oppose them when the debtor has not demonstrated the good faith required to justify an extension.
Does the automatic stay apply to guarantors as well as the primary debtor?
The automatic stay protects the debtor, the person or entity who filed bankruptcy. It generally does not protect guarantors or co-debtors unless the case is a Chapter 13, in which a special provision called the co-debtor stay may protect co-signers on consumer debts. For commercial guarantors, the automatic stay typically does not prevent the creditor from pursuing them even while the primary debtor is in bankruptcy.