When a debtor files for bankruptcy under the United States Bankruptcy Code, the bankruptcy court orders an automatic stay immediately upon the filing of the bankruptcy petition. An automatic stay is a court order preventing any creditor from doing anything further to collect on the debt. A motion for relief from automatic stay is a motion that may be filed by a creditor asking the court to lift the automatic stay and allow collection efforts, including foreclosure, to continue.
The requirements for filing, and succeeding, on a motion for relief from automatic stay will vary depending on the type, or chapter, of bankruptcy filed by the debtor. It may also vary somewhat by court despite the fact that bankruptcy rules are federal in nature and should be applied uniformly across the state bankruptcy courts. In all cases, basic information, such as a copy of the deed of trust or promissory note, mortgage documents, payment history, and any previous foreclosure or repossession proceedings, will be required.
If the debtors filed a chapter 7 bankruptcy, the court generally wants information regarding the current market value of the property. A chapter 7 bankruptcy is also known as a liquidation bankruptcy because all non-exempt property is liquidated to pay off the debtor's creditors. If the debtor has more equity in the property than is allowed under the chapter 7 rules, then the court will be more likely to grant the motion for relief from automatic stay, as the property will eventually be liquidated anyway. The creditor must generally obtain a certified appraisal of the property for the court to consider the value.
A chapter 13 bankruptcy, on the other hand, is known as a reorganization because it allows the debtor to pay off his or her debts over time without selling non-exempt property. As such, the court will be more concerned with whether the debtor has made payments as scheduled on the property since the filing of the bankruptcy petition. An affidavit stating that the debtor has failed to make payments since the filing of the petition is generally required to succeed on a motion for relief from automatic stay in a chapter 13 bankruptcy.
Once the motion for relief from automatic stay is filed, the court will scheduled a court date to hear arguments on the motion. If the motion is successful, then the creditor may proceed with collection of the debt. In most cases, this means foreclosure of real property.