When you are in debt, you may exhaust every option before deciding that filing for bankruptcy is in your best interest. Coming to this decision can be incredibly difficult, but you may have decided that the benefits outweigh the disadvantages of this option. However, when you file, you are granted protections under the automatic stay. It is imperative to understand how and when creditors can object to this stay to best prepare yourself for what you can expect after filing. The following blog explores these matters in further detail and the importance of working with a Shelby County, TN bankruptcy attorney to guide you through this complicated legal matter.
What Is the Automatic Stay During Bankruptcy?
When you file for bankruptcy in Memphis, you’ll find that you are immediately granted protection under the automatic stay. Essentially, this is an order imposed by the bankruptcy court that prevents creditors from starting or continuing collection efforts against you. This includes actions like contacting you regarding a debt, foreclosures, judgments, wage garnishments, and repossessing property.
Creditors who violate the automatic stay can face serious consequences, including being held in contempt of court and paying the victims’ legal fees, damages, restitution, and even punitive damages. As such, it is rare for creditors to violate the stay, and most instances are accidental. For example, if you file for bankruptcy on Monday but receive a letter in the mail from a creditor on Wednesday regarding the debt, the letter was likely mailed before your filing.
Because there are harsh penalties for those who violate the automatic stay, many creditors instead opt to object to the stay by filing a motion to have the stay lifted. When the courts agree to lift the automatic stay, the creditor can then continue collection efforts against the debtor. However, the court will only grant this motion if certain elements are proven by the creditor.
Under What Circumstances Can Creditors Object?
Generally, when a creditor wishes to continue collection efforts, the first step they must take is to file a motion with the court to grant relief from the automatic stay. Once this is filed, the court will set a hearing date at which the creditor can present evidence as to why the stay should be lifted, and the debtor can counter these arguments to protect themselves.
As mentioned, there are only certain situations in which a judge will lift the automatic stay. Typically, this is most common with creditors who have a secured debt and want to repossess and sell the collateral under the following circumstances:
- The value of the asset would decrease during bankruptcy, thus harming the creditor
- The debtor filed as a means to avoid payments
- The debtor cannot maintain insurance on the asset
- The debtor is unable to afford a Chapter 13 repayment plan
In addition, the creditor must show that the property is not valuable to the bankruptcy estate and that no unsecured creditors would benefit from the property remaining in the bankruptcy estate.
Filing for bankruptcy is often a complicated and overwhelming process for many. As such, it is in your best interest to connect with an experienced attorney to help guide you through this legal matter. At the Arnold Law Firm, our team understands the complexities of these matters, which is why we will do everything in our power to help you fight for the best possible outcome. When you are ready, contact us today to learn how we can fight for you.
