When Can Creditors Use Lift Stay Motions in Bankruptcy Cases?

 Posted on May 30, 2023 in Bankruptcy

When a person or business files for bankruptcy, an automatic stay is imposed to protect their finances and ensure that they will not experience additional losses due to creditors' attempts to collect debts. While the automatic stay is in effect, creditors are not allowed to make any collection efforts, including calling or otherwise contacting a debtor, sending bills or notices, filing lawsuits, collecting judgments, foreclosing on a home or other real estate property, or repossessing a vehicle or equipment. However, there are some situations where creditors may believe that they could experience significant losses due to actions taken by debtors during the bankruptcy process, and they may be able to file a motion to lift the automatic stay, giving them the ability to collect what is owed to them. It is important for creditors to understand how lift-stay motions are handled in bankruptcy cases.

What Is a Lift Stay Motion?

A creditor may request that the court lift the automatic stay after a debtor files for bankruptcy. While the automatic stay is designed to give a debtor a chance to reorganize their finances without interference from creditors, there are some situations where debtors may take inappropriate actions after filing for bankruptcy that would prevent creditors from being able to protect their financial interests. In certain circumstances, creditors can file lift-stay motions to ask the court to allow them to continue their collection efforts against the debtor.

When Can Creditors Use Lift Stay Motions?

In general, lift stay motions may be used when a creditor believes that they need to take action to protect their interests in property held by a debtor. If the debtor has no equity in the property used to secure a debt, the creditor may seek to take possession of the property, and a lift stay motion may allow them to proceed with a foreclosure or repossession. Lift stay motions may also be used if there is a concern that a debtor will damage or destroy collateral. Abuse of the bankruptcy process, such as filing for bankruptcy multiple times within a short period of time, may also be an indication that a debtor is seeking to avoid paying their debts, and a creditor may pursue a lift-stay motion in these situations in order to resume collection actions.

How to File a Lift Stay Motion

Creditors must submit a written request to the bankruptcy court detailing why they request that the automatic stay be lifted, and they must include supporting documentation and evidence. The motion must also be served on all the parties involved in the case, including the debtor, giving them a chance to respond. The court will then schedule a hearing to consider the motion and any objections raised by the debtor. If the court grants the motion, the stay will be lifted, and the creditor can resume their collection activities against the debtor.

What Happens if a Lift Stay Motion Is Denied?

If the court denies a creditor's request to lift the automatic stay, the creditor will not be able to take any collection actions against the debtor during the bankruptcy process. The automatic stay will usually remain in effect until the debtor receives a discharge or the bankruptcy case is dismissed. If necessary, creditors can file subsequent lift stay motions based on new information or circumstances that indicate that a debtor is taking actions that could affect a creditor's interest in collateral used to secure debts.

Contact Our Illinois Lift Stay Motion Lawyers

As a creditor, understanding when lift stay motions can be used is an important part of protecting your financial interests in bankruptcy cases. It is important to follow all the proper procedures when addressing issues related to debtor bankruptcy filings. At Dimand Walinski Law Offices, P.C., our Chicago creditors' rights attorneys can help you navigate bankruptcy cases effectively and ensure that you will be able to protect your financial interests as you seek to recover debts. Contact our office at 312-704-0771 to set up a consultation.

Sources:

https://www.law.cornell.edu/rules/frbp/rule_4001

https://www.thebalancemoney.com/how-long-does-the-automatic-stay-last-316168