I always tell Chapter 13 clients if they receive what is known as a “Motion for Relief from Automatic Stay” it generally means that they are not doing what is required under their Chapter 13 Plan of Reorganization.  There are exceptions, but they are rare and I want to provide information to my Chapter 13 clients who are facing a Motion for Relief.

If you receive a Motion for Relief from the Automatic Stay in the mail and I am representing you in a current Chapter 13 case, then I have already received the Motion electronically before you receive the same in the mail.  If I don’t make contact with you about the Motion, then I would respectfully request that you make contact with me to discuss why the Motion was filed.  Even though car creditors can file a Motion for Relief, it is more common for your mortgage company or mortgage servicer to file the Motion.

Why was the Motion filed?  Typically it means you have failed to stay current with the direct payments to your mortgage company during the course of your Chapter 13 Plan.  This means you are not in compliance with the terms of your plan.  Under those circumstances the mortgage company is asking the bankruptcy court to lift the automatic stay (which prevents the mortgage company from foreclosing while your in the bankruptcy). 

When a Motion for Relief is filed it is necessary for me to object to the Motion within a set period of time.  The bankruptcy court then sets the Motion for hearing.  The setting of that hearing generally spurs a conversation between myself and the attorney representing the mortgage company.  For informational purposes we are going to assume that an agreement is worked out between myself and that attorney, which is the case the majority of the time.  That agreement is typically reduced to writing in an Agreed Order that is presented to the bankruptcy court for approval.  Again, most typically the agreement gives the Debtor a six month period to cure the post-petition mortgage arrears.  These are the payments that came due after the filing of the bankruptcy case, but were not made by the Debtor.  It is important to keep in mind that these post-petition arrearages must be made in addition to the plan payments and the normal direct payments to the mortgage company.

What happens if a payment called for under the Agreed Order is not made, or the normal direct payments to the mortgage company and/or plan payments are not kept current?  If this occurs the mortgage company will send the Debtor a Notice of Default by mail.  This Notice of Default will give the Debtor ten (10) days to cure the default.  If the default is not cured within that ten (10) day period, then the automatic stay will lift and the mortgage company can resume all collection activity, including proceeding with a foreclosure.  If the Debtor defaults for a third time under the typical Agreed Order, then the stay will automatically lift upon that third default. 

 As always, any opinions expressed on this website are just that, opinions. Your individual situation might be different than outlined above, so it is probably best that you give me a call to discuss your individual situation.

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