Bankruptcy Alphabet – R is for Relief from Stay
What is Relief from Stay in Bankruptcy?
One of the powers in bankruptcy that my clients enjoy the most is the automatic stay. Upon filing bankruptcy an injunction goes into effect that generally prevents creditors from taking most actions against the person that filed and against their property. This includes foreclosures, repossessions, most lawsuits, collection efforts and typical creditor harassment. The stay is automatic, meaning that arises by operation of law upon filing for bankruptcy.
Sometimes you will hear the term “relief from stay.” This means that a creditor acknowledges the automatic stay, but it goes to the bankruptcy court and files a motion to permit the creditor to proceed in some manner against the person that filed or against his or her property. This is referred to as filing a motion for relief from the automatic stay.
We see relief from stay motions most often in relation to foreclosures. Many of our clients are behind on mortgage payments and file bankruptcy to stop foreclosure via the automatic stay. Due to misinformation, a lot of my Chapter 7 clients believe that when they file Chapter 7 the automatic stay is permanent and foreclosure cannot happen again. If you intend to keep the property, it is important to understand that the automatic stay expires by operation of law after you receive your discharge. But if you are behind on your Chapter 7 payments, the bank can move for relief from stay immediately after filing requesting permission to proceed with the foreclosure. In most cases the court will grant the motion.