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.

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 .