Written by Charleston Bankruptcy Attorney, Russell A. DeMott
During your bankruptcy case, you may receive documents concerning your case. One of the documents you may receive is called a “motion for relief from the automatic stay.” We’ll call it a MFRS for short. The automatic stay is the order from the court prohibiting creditors from taking any action to collect debt they are owed. It’s called “automatic” because it issues instantly and without request in every bankruptcy case, except in a few narrow situations.
The automatic stay means that once your bankruptcy is filed, creditors cannot sue you (or continue action in cases already filed), call you, write to you, harass you, or take any other action to collect debt. However, the Bankruptcy Code also provides that the creditor may request that the automatic stay be lifted.
It’s common for debtors to provide for “surrender” of various assets in bankruptcy cases. For example, you may have a car you can no longer afford, or rental house you no longer wish to keep. In a Chapter 7 case, your “Statement of Intention” must state whether you were going to retain any secured assets (house, car, equipment, furniture, and so on) or whether you will simply surrender those assets.
Once the case is filed, secured creditors may file a MFRS as allowed under section 362 of the Bankruptcy Code. Most creditors still serve the debtor by first-class mail as well as the debtor’s attorney (electronically through the court’s ECF–electronic case filing–system) although this may no longer be required under your local bankruptcy rules. DON’T PANIC! If you get a MFRS on property you no longer want to retain, it’s not a problem. Just understand that the creditor needs an order from the court to take back the property. This process is normal and part of almost all Chapter 7 bankruptcy cases.
In Chapter 13 the debtor files a plan telling the court, Trustee, and creditors how secured creditors will be treated. The process is similar to Chapter 7 regarding the surrender of secured assets. The plan will state that the particular asset will be “surrendered.” Again, as with the Chapter 7 case, the creditor will file a MFRS. Again, don’t panic if you get something in the mail or from you attorney. This is normal.
As always, if you have questions, contact your attorney for clarification. Make sure you understand what’s going on in your case.