Can Creditors Get Relief from the Automatic Stay?

November 20, 2012

For many debtors, the automatic stay is the brass ring of bankruptcy. This crucial provision of the Bankruptcy Code stops, or "stays," creditors attempts to recapture a debtor’s assets through state remedies. In general, so long as the bankruptcy is pending, a debtor’s creditors will be prevented from collecting on outstanding debts.


Do creditors have any protection against the automatic stay? They don’t have many, but those that they have are important. Exceptions to the automatic stay may be cracks in the debtor’s wall, letting in precisely the claims the debtor sought to keep out.


If the creditor can prove that debtor lacks the resources to protect the value of the collateral – known under the Bankruptcy Code as posting "adequate protection" – then the creditor may successfully convince the bankruptcy court to "lift" the automatic stay. Likewise, if the creditor convinces the court that the debtor hasn’t filed the bankruptcy in good faith and is merely advancing a scheme to delay, hinder, or defraud his creditors, then the court may lift the stay, too.


Your attorney should be able to help you understand the protections of the automatic stay and the reasons your creditors may seek relief from it. If you’re considering representing yourself, you may be wise to consider hiring skilled counsel. The attorneys at Fears Nachawati understand the value of the automatic stay and many of the other protections under the Bankruptcy Code that you may not fully appreciate. Want to know how we can help? Contact us today for your free consultation. We’re ready to advise you.

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