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Can A Mortgage Company Object To A Bankruptcy Automatic Stay?

  • By: Christopher Benson
  • Published: March 23, 2015

The automatic stay is a bankruptcy protection that “puts the brakes on” so that creditors have to stop all collection efforts so that the Debtor (person filing bankruptcy) and the Bankruptcy Trustee have an opportunity to have a more time to evaluate the financial situation. When you file for bankruptcy, the automatic stay freezes collections activities in order to give the trustee a chance to take inventory. This means no assets come in, and none go out without approval of the Bankruptcy Court. The bank can’t come take anything away—but you also have to get approval to make any large purchases as long as your case is ongoing. When your case is concluded, this protection is lifted.

However, the protection of the automatic stay can be lifted concerning a creditor if the creditor asks the Court for permission to proceed with their “in rem” remedies against certain assets if the creditor can show that they are not “adequately protected.” If a creditor thinks that either the automatic stay or bankruptcy protection is not going to change your situation in a significant way, then they can petition the court to lift it and allow them to retrieve their assets faster. You can oppose the creditor’s motion in court, and the bankruptcy court will hold a hearing to determine the outcome of the stay.

In Chapter 7 cases, mortgage lenders may petition the court to lift the stay if the home is so close to foreclosure that the bankruptcy case is not going to change it. In Chapter 13 cases, once the court has approved a repayment plan that account for all your mortgage payments that have been missed, called arrearages, then the bank cannot take any foreclosure actions. However, if you miss a payment, then they are allowed to move ahead with foreclosure.

It’s easier for a mortgage lender to lift the stay in Chapter 7 cases, since Court is not directly approving a plan to catch-up on the past due payments. In Chapter 7 cases, secured creditors, like mortgage holders, are first in line for either debt repayment from the sale or assets or to reclaim their assets. In order to keep your home in a Chapter 7 case, you must be able to raise enough money to come current on your mortgage.

the lack of ability to obtain a Court Approved Plan to catch-up on the missed payments in a Chapter 7 case is one of the main reasons people select to file a Chapter 13 bankruptcy instead.

In Chapter 13 cases, all the debt is being repaid, and in some cases debtors can even get a loan modification making their mortgage payments more affordable, so as long as the debtor stays current on the payment plan, they are not likely to lose their home.

Over the past 32 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can stop your garnishment and change your monthly payments for all your combined unsecured debt, and if you have had more than $600 garnished within the last 90 days, we can get all of the money back in most cases. But you have to act quickly–call (253) 815-6940 for your free consultation, or email us today. Evening and weekend appointments available.

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