Relief from Automatic Stay

Definition - What does Relief from Automatic Stay mean?

A Relief from Automatic Stay is a formal request that is made by a creditor to the court in order to allow the creditor to begin or resume collecting payments directly from the debtor that filed bankruptcy. After a bankruptcy is finalized the only way a creditor can collect against a bankrupt individual is with the specific permission of the court. The creditor will file a Relief from Automatic Stay to formally ask permission from the judge to receive payments. If the judge grants the relief from automatic stay, then the debtor is forced to pay the creditor to the amount defined by the judge according to court appointed terms.

Justipedia explains Relief from Automatic Stay

In many bankruptcy cases there are not enough assets on hand to liquidate to be able to pay all of the creditors. Once the bankruptcy proceedings begin, the Trustee steps in to determine if there are assets. Additionally, all creditors are advised of the bankruptcy and are no longer allowed to pursue collection. If there are assets, the Trustee liquidates them to distribute the proceeds to creditors. Creditors usually only receive pennies on the dollar.

However, in certain instances some creditors may petition the court for relief from automatic stay. Essentially, they are asking the court for permission to pursue collection or to receive on going payments such as monthly payments for a car loan. If granted by the judge, the creditor is then able to receive payments from the debtor.

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