What Is a Petition to Lift a Stay?

By Jimmy Verner

The automatic stay in bankruptcy immediately stops most lawsuits by your creditors. In particular, it prohibits them from filing or continuing with suits to collect an unsecured debt. However, when a creditor has a lien on property in your possession -- such as a mortgage on your house or a car loan -- the creditor can file a request with the bankruptcy court to lift the automatic stay.

The automatic stay in bankruptcy immediately stops most lawsuits by your creditors. In particular, it prohibits them from filing or continuing with suits to collect an unsecured debt. However, when a creditor has a lien on property in your possession -- such as a mortgage on your house or a car loan -- the creditor can file a request with the bankruptcy court to lift the automatic stay.

Default on Secured Loans

An unsecured creditor is one that does not have a lien on anything you own; consumer credit card debt usually is considered unsecured. On the other hand, a secured creditor has a lien on property that it financed to make the purchase possible, such as a boat or a recreational vehicle. When it comes to secured creditors, bankruptcy courts usually allow a lawsuit for foreclosure or repossession to go forward if you quit paying the debt. Creditors ask the bankruptcy court to allow this by petitioning for a lift of the stay.

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What Does It Mean if a Bankruptcy Is Lifted?

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