Motion for Relief from the Automatic Stay&Chapter 7 bankruptcy cases

First thing first, what does a motion for relief from the automatic stay actually mean? It means that at this time you are several months behind on your car or mortgage payment and the bank is requesting permission from the bankruptcy court in order to eventually repossess/foreclose on your car/home. It really should be called motion seeking permission to repossess/foreclose on property, but lawyers like to use all kind of “fancy talk.” The whole motion, summarized into one sentence really states the following: “Dear bankruptcy judge, the following individual is now “xyz” months on their mortgage/car payment and therefore we would like your blessing to commence a repossession/foreclosure on this property.”

Keep in mind that when you file a chapter 7 bankruptcy case, or any type of bankruptcy for that matter, the “automatic stay” goes into effect. The “Stay” is the “Shield” that prohibits creditors from further pursuing their collection efforts like filing a lawsuit, garnishing, repossession or foreclosing. In light of that, secured lenders (the bank that gave you your car loan or mortgage) will need to seek permission from the bankruptcy court before they can continue with their efforts of foreclosing for instance. They will need to file a motion seeking relief from the Stay before they can continue down the path of foreclosure.

And here is why this Motion seeking relief from the stay is virtually meaningless in the context of a chapter 7 case (it has plenty of meaning in chapter 11 or chapter 13 cases!) and why you should not worry if the mortgage company files this motion in your chapter 7 bankruptcy case: The automatic stay in bankruptcy terminates when the discharge is granted. So, in your typical chapter 7 bankruptcy case, roughly 100 days after your file for chapter 7 bankruptcy the discharge order is entered, the cases closes, and the stay is terminated. The foregoing makes sense. Now that your bankruptcy case has concluded the “Shield” goes away. The banks of course know this. They of course also know that once the chapter 7 case closes they have the right to foreclose on you home if you are behind on your mortgage if no loan modification has been worked out. They know that they can sit back, wait about three months, and then pick up where they left off as far as the foreclosure goes. But instead they file this scary motion, notice it for hearing, go before the judge, and with about three weeks before the cases concludes they get the judge to sign off on this motion. Then they wait about three more weeks after your chapter 7 case has closed and initiate foreclosure. It is nonsense. It is a waste of time and paper. Why? Because the filing of this motion does not speed of the foreclosure.

To put it differently, in the past decade I have never once seen a bank foreclose on a home during the 100 days that the bankruptcy was open even though the judge granted the motion and gave them the “green light” to foreclose. The foreclosure, in chapter 7 cases, if it is going to happen, always happens after the bankruptcy case closes. And since most people in this kind of situation have either given up on the house and are planning on “walking away” or they are planning on filing a chapter 13 bankruptcy shortly after their chapter 7 case closes (AKA “chapter 20”) they have nothing to worry about. They can safely ignore this motion.