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What is Stay Relief?

When you file bankruptcy, secured creditors, the ones who you generally borrowed money from to purchase a car, home, furniture, or an appliance, want to make sure that the car, home, furniture, or appliance is safe during the bankruptcy.  This is because that particular item is securing the loan you have with that lender.  In other words, if you stop paying or don’t pay enough, they we will repossess the item to compensate them for the loss. However, during bankruptcy creditors can’t go repossess items unless the court gives them permission.  This is because the “Automatic Stay” prevents the creditor from acting as it normally would outside of bankruptcy (for more on the “Automatic Stay” read the posting What is the Automatic Stay?).

There is only one way for a secured creditor to get permission—to file motion for stay relief.  There are two reasons that a creditor would win a motion for stay relief.  First, if there is no equity.  For example, if your car is worth $7,000.00 and you still owe the bank $8,000.00, there is no equity in the car and the creditor could get stay relief. Conversely, if the car is worth $8,000.00 and you still owe the bank only $7,000.00, there is equity in the car and the creditor could not get stay relief.  The second way for a creditor to win on stay relief is to prove “cause.”  This pretty much means that the creditor needs to show that he is not protected.  For example, you have a car loan with a bank and the car is in your possession but it isn’t insured, the creditor would win a stay relief motion because the item is unprotected in the event that you get in an accident.

Tips as you prepare for bankruptcy:

1- If you want to keep the item, keep making payments, a creditor is unlikely to seek stay relief if he is being paid.

2- Keep the item insured if the contract requires.

3- Speak to your attorney early so you can game plan the most effective methods.

4- Before you file bankruptcy, creditors often call, harass, and even repossess your property.  The second you file bankruptcy a creditor must cease all actions against a debtor pending the “Automatic Stay.”  The Automatic Stay is like a fictitious concrete barrier between you and the creditor.  If you like football, it’s like an offensive line that never gives up a sack, and you’re the quarterback.  There are only a few exceptions that allow a creditor to get around the Automatic Stay, but they are limited (for more on Stay Relief, read the posting, What is Stay Relief?).

5- The Automatic Stay is guaranteed to last a minimum of 90 days from when you file bankruptcy, sometimes it can last much longer.  The reason for the Automatic Stay is to allow the bankruptcy process to work.  Because the Automatic Stay is in place, debtors can work with their attorney, the trustee, the court, and even creditors to optimize the process.  The automatic stay provides a debtor with a temporary relief while the debtor awaits a permanent relief at the end of the case.  If you would like to learn how the automatic stay can help your situation, just give us a call.


We are a debt relief agency. We help Utah individuals and businesses file for bankruptcy under the U.S. Bankruptcy Code. The information in this website is not intended as legal advice or to create an attorney-client relationship. The information, documents or forms provided herein are only intended for general information purposes and must not be regarded as legal advice. It is important that you seek legal counsel in order to ascertain your rights and obligations under the applicable law and based upon your specific circumstances.