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How to Fight a Motion for Relief From Automatic Stay

George Simons | December 29, 2022

What debt collectors don't want you to know ^^

Summary: When you file for bankruptcy, an automatic stay protects you from any debt collection actions by your creditors. A Motion for Relief From Automatic Stay is a formal request by a creditor to exempt them from the automatic stay so they can proceed with collection efforts. You can use procedural or substantive objections to fight a Motion for Relief From Stay and win in court.

If you are struggling with a mountain of debt and ultimately decide to file for bankruptcy, one of the benefits associated with a bankruptcy filing is the “automatic stay” that is issued by the bankruptcy court.

An automatic stay means that you are protected from any further collection efforts by creditors and debt collection agencies. The stay will generally protect you for the duration of your Chapter 7 or Chapter 13 proceedings. The overarching objective of the automatic stay is to give consumers a break from the constant harassment that is routinely deployed by creditors, offering some breathing room to develop a plan to reorganize and improve their financial situations.

However, there are instances where a creditor will file a Motion seeking permission from the court to take certain collection efforts against you, even while your bankruptcy proceedings are active. This is known as a Motion for Relief From Automatic Stay.

In this article, we’ll discuss how you can respond to, and fight, a Motion for Relief From Automatic Stay. We’ll also touch on how to beat creditors and debt collectors in and out of court.

What is a Motion for Relief From Automatic Stay?

A Motion for Relief From Automatic Stay is a legal document filed into a bankruptcy case that, if granted, that gives the creditor an exemption from an automatic stay. In other words, a Motion for Relief from Automatic Stay is an official request from a creditor to take action against a debtor or the debtor's property that would otherwise be prevented by the automatic stay.

It is important to note that the vast majority of creditors do not try to file a Motion to Lift Automatic Stay. It is usually a fairly rare occurrence. Nevertheless, if the creditor in your bankruptcy case decides to file the motion, you will receive formal notice and get the chance to argue against granting relief at a hearing. It is also worth noting that the burden of proof falls on the creditor, meaning they must prove that the Motion for Relief should be granted by the bankruptcy court.

Let’s consider an example.

Example: Lucas files for Chapter 13 bankruptcy, and as part of the terms of the bankruptcy case, he is protected from debt collection efforts of his creditors under an automatic stay. However, one of Lucas’ creditors files a Motion for Relief from Automatic Stay into the case, requesting permission to continue collections. However, the creditor never notifies Lucas of the motion. In order to fight the Motion for Relief From Automatic Stay, Lucas uses a procedural objection to explain to the court that he wasn’t properly notified of the motion. The court denies the creditor’s motion, and Lucas remains safe from debt collection efforts throughout the duration of his Chapter 13 bankruptcy case.

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Creditors may have good reason to file a Motion for Relief from Stay

As mentioned, when a creditor wants to contest the automatic stay in a bankruptcy proceeding, they will file a Motion for Relief From Automatic Stay with the court. Below are some of the most common arguments made by creditors to try and persuade a bankruptcy court to lift the automatic stay:

The assets that back a secured debt do not cover the loss

If you are behind on your mortgage when filing for Chapter 7 bankruptcy, there is the possibility that your mortgage lender will file the motion for relief and request that the court lifts the stay so it can continue with foreclosure proceedings.

Motions for Relief are most commonly filed by “secured” creditors (i.e. your mortgage lender or auto lender) particularly when there is not enough equity in the property to offset the outstanding balance on the loan.

Courts may consider granting the Motion for Relief if the secured creditor cannot bring your payments current by seizing the property that serves as collateral for the secured debt (e.g., your automobile or home). Conversely, a bankruptcy court will probably deny the Motion for Relief if there is evidence that the equity in the property is sufficient to repay the loan and the lender is sufficiently protected from enduring a financial loss.

An unsecured debt will not be discharged in bankruptcy

Most unsecured creditors (e.g., credit card companies) do not file a Motion for Relief, but there are unique circumstances where they go ahead with the motion. Generally, a bankruptcy court would consider granting the Motion for Relief if the unsecured debt will not be discharged in a Chapter 7 bankruptcy proceeding.

However, the vast majority of Chapter 7 bankruptcy cases are concluded within four months. As a result, unsecured creditors typically wait until the bankruptcy proceeding is done to initiate collection efforts.

In a Chapter 13 bankruptcy case, you are obligated to repay most non-dischargeable debts in full throughout a three-year or five-year repayment plan.

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Use these defenses to a Motion for Relief From Automatic Stay

When a creditor files a Motion for Relief From Automatic Stay, you will receive a notice of the request and a specific hearing date where you can argue against the court granting the motion.

It is extremely important to respond to the notice within 14 days of being served with the motion. Why? Because if you fail to respond within the designated period, the court may go ahead and grant the motion because of your lack of response. Do not let this happen.

Generally, there are two strategies for effectively fighting a Motion for Relief From Automatic Stay. The first strategy is to raise procedural objections (which contests the method used by the creditor to file the motion). The second strategy is to raise substantive objections (which contests the substance of the motion itself).

Let’s take a closer look at each type of objection to a Motion for Relief From Stay below.

Procedural objections to a Motion for Relief examples

You may be able to raise a procedural objection if there is evidence that the creditor failed to properly follow the rules when filing the motion. For example, creditors are required to serve you with a formal notice of the motion. If the creditor failed to properly initiate service of process, you could contest the motion for relief on procedural grounds.

Another situation that could give rise to a procedural objection is related to the documents that must be served to you by the creditor. Specifically, you need to be served with documents containing the following information:

  • Detailed description of the property
  • Value of the property
  • Amount of the loan
  • Amount allegedly owed
  • The original and current monthly payments

If a creditor fails to include these evidentiary documents with the motion for relief, it could enable you to raise a procedural objection with the bankruptcy court.

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Substantive objections to a Motion for Relief examples

In addition to procedural objections, you could raise a substantive objection to fight the motion. Generally, a substantive objection is more difficult since it usually necessitates researching the Bankruptcy Code and highlighting a specific deficiency or issue.

An example of a substantive objection you could raise is when your mortgage lender filed the motion for relief to continue with foreclosure proceedings on your home. You could object to the motion by asserting that your reorganization plan was confirmed or is likely to be confirmed soon, and the payments owed on the mortgage for your home are provided for in the plan. You could also object if you applied for, or received, a loan modification agreement that lowered the monthly payments on your mortgage.

When you file for bankruptcy, the court will issue an automatic stay that halts most collection efforts during your bankruptcy. However, a creditor can file a motion for relief to have the stay lifted. If you have a creditor who decides to file this motion, do not throw your hands up in despair. There are ways to effectively fight the motion for relief from automatic stay.

You can fight a Motion for Relief From Automatic Stay and win

Example of defenses to Motion for Relief From Stay

Let’s take a look at a real court case, filed with the US Bankruptcy Court, where the debtor fought a Motion for Relief From Automatic Stay—and won!

In this case, the debtor had several liens placed on his home connected with debts he owed. As such, he filed for Chapter 13 bankruptcy and notified each company or individual that had placed a lien on his property.

One of the lienholders acknowledged that he received notification of the Chapter 13 bankruptcy filing, and he failed to file a proof of claim or object to confirmation of the Debtor’s Chapter 13 plan.

As a result, when the lienholder filed a Motion for Relief From Automatic Stay into the case, it was denied by the court because of his failure to object to the plan and the fact that the plan still adequately protects the lienholder, as it includes a full payment of the value of the debtor’s share of the non-exempt equity.

Remember: most creditors do not file this type of motion into a bankruptcy case, but in the event that they do in yours, you still have options. You’ll want to consult with your attorney to find the best defense.

Respond to a debt collection lawsuit

If you find yourself being sued for a debt you owe, you should respond to the lawsuit and fight back before considering bankruptcy.

You must respond to a debt collection lawsuit with a written Answer before your state’s deadline. Use these 6 tips to make your Answer and beat debt collectors in court!

  1. Keep your Answer brief: At this stage in the lawsuit, you should avoid giving too much information about your side of the story. Giving an elaborate description of your experience with the debt collector can actually end up hurting your case. For this reason, your Answer should focus on responding to each claim listed in the Complaint document.

  2. Deny as many claims as possible: Most attorneys advise you to deny as many of the claims as possible. This means, an Answer document that will be more likely to win will have a numbered list of responses that deny each claim from the Complaint. There may be some claims that are obviously true (for example, it may list your name or home address as one of the claims), and it's not a big deal to admit to those types of claims. But you will strengthen your case when you deny the debt collectors claims, because they must prove anything that is denied.

  3. Add your affirmative defenses: After you've responded to each claim, you should include a section for your affirmative defenses. This is any legal reason that the debt collector doesn't have a case against you. For example, a common and effective affirmative defense is to bring up that the debt is past the statute of limitations, like we mentioned earlier in this article. SoloSuit can help you come up with a list of affirmative defenses, written in proper legal writing, and strengthen your side of the case.

  4. Use standard formatting and style: Your Answer needs to be neat and professional. You should use standard font and margins (12pt, Arial, etc.). You should also include a caption at the beginning of the Answer document that outlines the case number, venue (court), and parties information. SoloSuit's Answer form includes clean formatting and a caption.

  5. Include a certificate of service: Some courts require you to include proof that you served the opposing party. This is often called a certificate of service, and it should be found at the end of the document. This is where you list the name and address of the party to whom you sent a copy of your Answer. SoloSuit's Answer form also includes a certificate of service.

  6. Sign the Answer document: Don't forget to sign your Answer! Most courts reject any Answer documents that do not include a signature, so while this may seem like a simple step, it is often the most important!

Check out this video to learn more about these six tips to respond to a debt lawsuit:

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