What Is the Meaning of Bankruptcy Protection?
Bankruptcy protection is one of the primary benefits to an individual filing for insolvency. This keeps creditors at bay so the debtor has an opportunity to get back on her feet financially. Violating the automatic stay may mean the creditor has to pay the debtor damages for trying to collect a debt when it should not have.
Other People Are Reading
-
Bankruptcy Protection
-
Bankruptcy protection is to term used to describe the automatic stay in bankruptcy. The automatic stay is a hold put on all collection activity against the debtor or the bankruptcy estate. This keeps creditors from being able to file suit against a debtor, repossess property or even send collection letters to someone that has filed bankruptcy.
Does Not Apply
-
The automatic stay does not apply to all legal actions. For example, suits to determine paternity, child custody and visitation, and domestic violence suits may continue. Divorces may continue, but only to the extent they do not include any property settlement or agreement, because the bankruptcy court would have to approve any such distribution.
-
Lifting the Stay
-
Creditors have the option to ask the court to lift the bankruptcy protection so they may proceed with collection activities, such as repossessing property or foreclosing on a house. If it is apparent that the debtor will not able to retain the property, or otherwise should not be allowed to, the court may allow a creditor to pursue the property. To ask the court to lift the stay, a creditor files what is called a motion to lift the automatic stay.
Answering a Motion to Lift the Stay
-
A debtor has a set number of days to object to a motion to lift the stay, usually 15 to 20. If he does not object, the judge will immediately side with the creditor and sign the order lifting the stay. However, if a debtor files an objection to the motion, it will be set for hearing.
Hearing on Motion to Lift the Stay
-
Although many conflicts regarding lifting the automatic stay may be settled before hearing, some do go all the way before the judge. If it does, each side will have the opportunity to argue why the bankruptcy protection should be lifted or preserved. After the hearing, the judge will decide which argument has more merit.
-
References
- Photo Credit Pennies on the Dollar - one dollar bill with pennies. image by Andy Dean from Fotolia.com
