What Does "The Automatic Stay Has Been Lifted" Mean?

How Does the Automatic Stay Work?

The automatic stay grants you some relief from collection activities while your bankruptcy case is pending. It’s outlined in the federal laws governing bankruptcy called the Bankruptcy Code. It’s called an automatic stay because the protection begins automatically, the moment you file your case. This protection gives you the breathing room to focus on resolving your financial issues without the pressure of ongoing collection activities.

Once you file, the bankruptcy court will send a notice to all your creditors informing them that you’ve filed for bankruptcy. They get your creditor’s information from the creditor matrix — a complete list of all your creditors — you included with your bankruptcy petition. The notice requires creditors and debt collectors to immediately stop all collection efforts, including phone calls, wage garnishments, and foreclosure actions.

Keep in mind, there may be a slight delay before collection activities fully stop since the notice is typically sent by mail. However, if you inform a creditor about your bankruptcy filing yourself, they must stop collection efforts right away. If a creditor continues to contact you or attempts to collect a debt after being notified of your bankruptcy, the court can impose penalties on them for violating the automatic stay.

The Automatic Stay in Chapter 7 vs. Chapter 13 Bankruptcy

The automatic stay begins as soon as you file for bankruptcy, whether you file under Chapter 7 or Chapter 13. In Chapter 7, the automatic stay temporarily stops collection actions while your case is reviewed and your debts are addressed. Since Chapter 7 cases are typically resolved within a few months, the protection the stay provides is usually short term.

In Chapter 13, the automatic stay lasts much longer because this type of bankruptcy involves a 3–5-year repayment plan. During this time, the stay protects you from creditor actions while you make payments to catch up on overdue debts, such as missed mortgage or car payments. Chapter 13 gives you a chance to keep your property and manage your debts over a longer period.

The key difference lies in the purpose of each bankruptcy type: Chapter 7 provides a quicker path to resolving debts, while Chapter 13 focuses on creating a repayment plan to help you get back on track. This difference influences how the automatic stay works and how long it remains in effect.

How Long Does the Automatic Stay Remain in Effect?

Although the automatic stay provides immediate relief, it’s temporary. The automatic stay generally remains in place until the bankruptcy judge enters a discharge order. Once that happens, you’re no longer responsible for the unsecured debts incurred before your Chapter 7 was filed. The permanent protection from creditors provided by the discharge is much stronger than the automatic stay. 

Note that there are some exceptions to this general rule for people who file multiple bankruptcy cases. We discuss this more below.

What Is a Motion for Relief From the Automatic Stay? 

A motion for relief from the automatic stay is a request creditors make to the court to take certain collection actions against the bankruptcy filer. It’s also called a stay relief motion. A secured or unsecured creditor can submit a stay relief motion to the bankruptcy court, but secured creditors are more likely to file these motions. Secured creditors are creditors you have secured debt with, such as a car loan or mortgage.

Secured Creditors and Stay Relief Motions

Secured creditors are the most likely to file for relief from the automatic stay. Common examples of secured creditors in bankruptcy cases are mortgage lenders and car loan lenders. These lenders have a security interest in the property they’ve loaned you money for. This property is also called collateral. The collateral acts as security for the loan because the creditor can take it back if you aren’t making payments as agreed. 

Remember, filing for Chapter 7 allows you to walk away from your unsecured debts. But it doesn’t offer permanent relief or a repayment plan (like in a Chapter 13 bankruptcy) for secured debt if you’re behind. A creditor can file the stay relief motion to ask the court to remove the protection of the automatic stay so they can resume collection efforts and take back the property securing the debt. 

So, if you file Chapter 7 and you’re behind on your mortgage payments, your mortgage lender can file a motion asking the court to allow them to resume foreclosure proceedings. The court will likely grant the request because the creditor is entitled to move forward. 

If, however, you’re current on your mortgage payment when you file Chapter 7 and don’t fall behind during the case, the creditor is unlikely to file a motion for relief from the automatic stay. And even if they did, the court likely wouldn’t grant it because the creditor isn’t experiencing any harm.

Responding to a Motion for Relief From the Automatic Stay

When a creditor files a motion for relief from the automatic stay in a bankruptcy, they'll send a copy of the request to you and your attorney (if you have one) after submitting it to the bankruptcy court. You have 14 days to respond to the motion. If you don’t file a response in that time period, the court will grant the motion by default, since there was no objection. You might choose not to respond to a motion for relief if you’re planning to surrender the collateral as part of your bankruptcy filing anyway. 

If you decide to surrender your home in bankruptcy, the creditor can resume foreclosure proceedings once the order has been granted. But if you want to keep your home and are current on your payments, then you should respond within the objection period. The court will set a hearing date on the creditor’s motion so both parties can present evidence supporting their position. Often, the first hearing is mainly an opportunity for each side to state their case. The bankruptcy judge may ask each party to submit documentation before a final hearing.

The Stay Has Been Lifted — Now What? 

Once a creditor gets a court order lifting the automatic stay, they are allowed to move forward with foreclosure or repossession of the property that secures the debt. That said, the creditor still needs to follow state law for their collection or eviction proceedings. 

At this point, you may want to contact the creditor directly to come up with a mutually agreeable surrender or move-out date. You have the chance to make a plan instead of worrying about your car disappearing or your house being locked unexpectedly.

There’s an additional benefit to surrendering secured property through your bankruptcy: Any unsecured portion of the debt that you owe, such as late fees or penalties, will be wiped out with the bankruptcy discharge. If you were to surrender secured property without bankruptcy protection, you could be on the hook for a deficiency balance. This is a lose-lose scenario because you no longer have the property and you’re still paying on it. 

Sometimes the Automatic Stay Lifts Automatically

As mentioned before, the automatic stay ends when the discharge is entered because it’s no longer necessary. But there are other ways for the automatic stay to end automatically without the need for the creditor to file a motion with the court. This can happen if you don’t follow through on your Statement of Intentions or if you have prior bankruptcy filings. It’s important to be aware of these so you’re not surprised if the creditor takes action.

The Statement of Intentions and the Automatic Stay

One of the forms you file in a Chapter 7 case is called the Statement of Intentions. On this form, you list all secured debts and choose one of four options for dealing with each. You can:

• Surrender the property

• Redeem the property, which means you pay off its value

• Reaffirm the debt, which means you voluntarily take on an obligation you could otherwise walk away from in your bankruptcy, like continuing to make payments on a car loan or lease you want to keep

• Retain the property, which means you simply remain current on your payments or the creditor can repossess it

You’ll need to carry out your stated intention within 30 days of the first scheduled date for your meeting of creditors. Otherwise, the stay will lift automatically for that debt, and the creditor can proceed with collection efforts. 

Additionally, if you don’t carry out your intent by entering into a reaffirmation agreement or filing a motion to redeem the debt for a vehicle, it can be legally repossessed 45 days after the first scheduled meeting date.

How Do Prior Bankruptcy Filings Affect the Automatic Stay?

Prior bankruptcies will impact the automatic stay. If you’ve filed a bankruptcy case within the last year, the automatic stay will only be imposed for 30 days in your current case. If you want to retain the protection of the automatic stay for the entire period of your bankruptcy, you (or your bankruptcy lawyer) will need to file a motion to extend the automatic stay within those 30 days.

If you’ve filed two or more bankruptcies within the last year, you won’t get the benefit of an automatic stay unless the court grants a motion to impose the automatic stay. You (or your bankruptcy lawyer) must file this motion as soon as you file your case. In either situation, you may want to consult with a bankruptcy attorney for legal advice before filing a new case. 

Let’s Summarize…

The automatic stay is often a motivating factor for someone to file bankruptcy because it offers immediate protection from creditors. However, in a Chapter 7 bankruptcy case, a creditor can ask the court to lift the automatic stay before a discharge is entered if you are behind on payments for a secured debt, like a car loan or mortgage. 

You do have the option to state your intentions for dealing with each secured debt. But if you don’t follow up on your intentions, the stay will lift automatically and creditors will resume collection efforts.