The automatic stay in bankruptcy protects you from creditors and bill collectors taking action while your case is proceeding. So long as the automatic stay remains in place, you don't need to worry about a mortgage company foreclosing or the car lender taking back your automobile. In other words, the automatic stay is your safety net in bankruptcy.
Under some circumstances, however, a creditor may ask the court to lift the automatic stay and let them proceed with action against you. This is technically called a motion for relief from the automatic stay, which essentially means the creditor is asking the judge for permission. Think of it as the old game of, "Mother, May I?" taken in the context of a legal proceeding.
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Once granted, the creditor can pick up exactly where they left off before you filed for bankruptcy. So if the foreclosure sale was scheduled, it will be scheduled again. If the repo man was in the driveway, he'll be pulling up with the tow truck again.
In the context of a Chapter 7 bankruptcy, there aren't that many defenses to a motion for relief from the automatic stay. The reason for this is relatively simple - in Chapter 7, you're not using the stay for the purpose of catching up on the past due payments. You're in Chapter 7 to discharge debts, not to reorganize your finances. So the presumption is that there isn't a drive to keep making payments on the secured debt.
Still, it's important to recognize that there are a few ways to defend a motion for relief. You need to be able to ensure that:
The creditor is the proper party in interest. In other words, that the creditor seeking relief actually has the right to that relief. It must be the actual lender or servicer of the loan. If they don't own the loan or have some contractual relationship with the owner of the loan, they don't have the right to relief in the first place;
The creditor has followed all of the local and federal rules relating to proving their case. Coming to the court and saying, "give us relief because we said so," just doesn't cut it;
The creditor has properly served all required parties in the right way. Filing papers with the court without giving everyone proper notice is a sure-fire way to get a motion denied.
Even after relief from the automatic stay is granted, it's important to remember that this isn't the end of the road - it just takes the issue out of bankruptcy court and back into your state or local court. The creditor still needs to follow state law regarding repossession or foreclosure, so it's important to talk with your lawyer to learn your options when the stay is lifted.
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