Secured Creditors and The Automatic Stay

Secured Creditors and Relief From The Automatic Stay

In certain circumstances, a secured creditor can move the
court for modification of the automatic stay so that they
may pursue recovery of their collateral. For example, an
auto finance company can petition to the court to modify
the automatic stay if you are not making current payments
toward the creditor, if you are not up to date with the
creditor or if you are not properly insuring the vehicle
against loss.  In those cases, the creditor will be granted
its relief and will be permitted to recover the collateral
despite the bankruptcy filing.  In a Chapter 7 bankruptcy
case, you will lose the right to possess and own the
vehicle; however, you will not be responsible for any
outstanding debt related to the vehicle.  This could be a
tremendous relief for you by eliminating a huge vehicle
loan obligation.

As it relates to real estate mortgage companies, the same
situation as above applies.  The lender will petition the
court for relief if you are not making timely payments, if
you are not current with the loan, if you are not paying
the real estate taxes on the property or are otherwise
creating a hazard or risk to the lender.  Thus, in a
Chapter 7 bankruptcy case, the automatic stay will only
provide temporary relief to you as it relates to secured
creditors.  As far as general creditors and unsecured
creditors, the automatic stay may continue until the case
is discharged.  At that point, you likely be free from any
future obligation toward the creditor.

The Bankruptcy Estate

What is the bankruptcy estate?  The bankruptcy estate is
all of your property as of the date of the bankruptcy
filing, wherever located and by whomever held.  Every
possible interest (contingent, partial, legal or equitable)
goes into the bankruptcy estate.  Although there are
exemptions which allow you to keep all or a portion of your
property, the property is still technically considered
property of the estate.

The concept of the estate applies to property owned at the
time of filing.  Most of what you acquire after the date of
filing will remain your property.  However, there are a few
exceptions to this general rule.

If you inherit money or property within six months after
your case is filed, that money or property will become
property of the estate to the extent that it cannot be
exempted.

If you receive a marital property settlement that arises
from a pre-bankruptcy divorce or separation, then that
property becomes property of the estate to the extent that
the property cannot be exempted.

Tax refunds that are received after the date of filing
become property of the estate to the extent that they
cannot be exempted.


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David M. Siegel is the author of Chapter 7 Success: The
Complete Guide to Surviving Personal Bankruptcy. He is a
member of the American Bankruptcy Institute and currently
practices bankruptcy law in Chicago and its surrounding
suburbs. Additional information is available at
http://www.bankruptcy-lawyers-phoenix.com .