Motions for Relief from the Automatic Stay can be filed by creditors, and are often brought by mortgage companies when a homeowner files for Chapter 7 bankruptcy relief. (Car lenders also often bring such motions when a debtor has filed bankruptcy and he is late on a car loan.) In Chapter 13 bankruptcy cases, secured lenders bring such motions when the debtor fails to stay current with post-petition obligations.

If the Court grants a Motion for Relief from the Automatic Stay, the Court is essentially permitting the creditor to initiate steps to take back its collateral. In the case of a home, this would mean the lender is permitted to initiate the foreclosure process. In the case of a car, the lender would be able to exercise a replevin action and/or self-help remedy, such as repossession of the car.

In Virginia, subject to limited exceptions, creditors are not permitted to go against a Chapter 7 debtor for personal liability for any deficiency judgment or legal fees arising from the collection of the collateral. The important thing to remember: If you file for bankruptcy protection, your creditors must generally be granted permission from the U.S. Bankruptcy Court to engage in any collection activity against you. This serves to give a debtor some breathing room from which he can work to put his financial house in order. If creditors do not abide by this rule, they can be penalized through sanctions.

Contact the Simpson Law Firm at (703) 548-3900 and talk to an attorney with over two decades of experience. We have zealously defended our clients' rights under the Automatic Stay of the U.S. Bankruptcy Code and the Fair Debt Collection Practices Act.