Relief from Automatic Stay in Bankruptcy

One of the most purposeful and effective tools in bankruptcy is the “automatic stay.”  When a debtor files for bankruptcy, the “automatic stay”, codified in 11 U.S.C. § 362, operates to “stay” any collection or assessment efforts of creditors against the Debtor.  For example, if a debtor was facing a foreclosure and filed for bankruptcy, the automatic stay would in effect stop the mortgage holder’s efforts to foreclose on the house during the pendency of the bankruptcy proceeding.  The automatic stay, however, is not infallible and creditors can attempt to seek relief from the “automatic stay” through the Bankruptcy Court.

When a creditor is granted relief from the automatic stay, it is permitted to proceed with its collection efforts against the debtor.  There are multiple theories under which a creditor can seek relief from the automatic stay, which are codified in 11 U.S.C.§ 362(d).  The most often cited reason under which a creditor seeks relief from the automatic stay is “for cause” under 11 U.S.C. § 362(d)(1).  Whether or not “cause” exists for purposes of relief from stay is not codified in the Bankruptcy Code, so the court will determine on a case-by-case basis whether cause exists to lift the automatic stay.  The Bankruptcy Courts will engage in a factor analysis in which it weighs the prejudice suffered by the debtor of granting the relief from stay against the prejudice suffered by the creditor of denying the relief from stay.   Because the automatic stay is powerful and important tool for the debtor, the Bankruptcy Court will grant relief from the automatic stay under limited circumstances.

Julie Camden of Camden & Meridew, P.C. is experienced in matters regarding the “automatic stay.”  If you are a creditor seeking relief from the automatic stay or a debtor who is considering bankruptcy because of the benefits from the automatic stay, contact bankruptcy lawyer, Julie Camden at 317-770-0000 fill out our online contact form. She can assist you in determining the proper course of action that will meet your needs.

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