A consumer facing a insurmountable financial burden many times pursue either a
Chapter 7 or a
Chapter 13 bankruptcy. A Chapter 7 bankruptcy provides a consumer relief in the form of what
is known as a discharge from a good portion of his or her debts.
On the other hand, relief in a Chapter 13 proceeding involves the development
of a payment plan. Through a Chapter 13 plan, a consumer pays off his
or her debts by making one monthly payment to the bankruptcy court trustee,
who in turn makes a distribution of the funds to individual creditors.
A person in need to bankruptcy protection and relief is best served by
retaining services of a qualified, experienced bankruptcy attorney. With
that said, even after retaining a bankruptcy attorney, a debtor will face
questions about what is going on during the court process itself. For
example, a debtor may have questions about issues surrounding the automatic
stay order issued at the start of the bankruptcy proceedings.
The Function of an Automatic Stay in Bankruptcy
When a Chapter 7 or Chapter 13 bankruptcy petition is filed, the court
automatically issues what is called an
order. At its essence, the automatic stay order prevents any creditors
from taking any further action to collect on a debt without the express
prior approval of the bankruptcy court judge.
For example, if a debtor’s home is in foreclosure, the automatic stay
order prevents the mortgage lender from proceeding with that legal action
without approval from the bankruptcy court judge. No creditor is immune
from the automatic stay order. However, although the stay order is automatic
upon filing a bankruptcy petition, it is not permanent (as will be discussed
in a moment).
Evaluation of Assets and Debts: The Decision Making Process
When consulting with an attorney about a
bankruptcy, and after filing a petition with the court, a key task of the debtor
and his or her attorney is evaluating the assets and debts that are a
part of the court proceedings. In other words, a determination needs to
be made as to how a debtor wants to deal with a particular asset.
A home is a prime example of an asset that needs to be examined during
bankruptcy proceedings. In some cases a debtor desires to maintain possession
of a the residence during and after a bankruptcy proceeding. For example,
in a Chapter 13 case in which a debtor wants to keep his or her home,
mortgage payments will be included in the overall Chapter 13 plan.
On the other hand, a debtor may have title to a home that is underwater
when it comes to the value of the property and the outstanding balance
on the mortgage loan. In other words, the home is worth less than the
amount due on the mortgage. In such a case, the debtor is likely to want
to surrender the residence as part of the bankruptcy proceedings.
Motion for Relief from Stay
A creditor (usually a secured creditor like the holder of a home mortgage
loan) can file a motion for relief from stay with the bankruptcy court.
Through this motion, a creditor is asking for the court’s permission
to “re-start” its efforts to collect on the debt. For example,
a mortgage lender may file a motion for relief from stay to continue with
foreclosure proceedings on a residence.
Court Procedures Regarding a Motion for Relief from Stay
Once a motion is filed, the debtor’s attorney can oppose the motion.
Filing a response in opposition to the motion is not always recommended
or necessary. For example, if the debtor is underwater on the home mortgage
loan and intends to surrender the property, nothing is gained by opposing
the motion for relief from stay.
Ultimately, the court holds a hearing on the motion. If the debtor opposes
the motion, the judge takes evidence and listens to arguments from the
creditor’s attorney, the debtor’s attorney and usually the trustee
appointed by the court to oversee the case. If the debtor does not oppose
the motion, neither the debtor nor his or her counsel needs to attend
the hearing. In the end, the relief from the stay is consistent with the
position a debtor who wants to surrender property is taking.
Share Your Concerns with Legal Counsel
A debtor with questions or concerns about the bankruptcy process, including
what is and is not involved with a motion for relief from stay, needs
to consult with his or her attorney. An experienced bankruptcy lawyer
can explain these different legal processes and court proceedings. If
you have any questions feel free to
contact Allmand Law Firm, PLLC
and we would be more than happy to help answer your questions.