Can Your Lender Lift The Bankruptcy Stay On Your Home? 5 Indicators

30 May 2023
 Categories: Law, Blog


Bankruptcy can be one of the few ways to save your home from foreclosure due to debt. One of its most powerful tools is known as the automatic stay. The automatic stay bans creditors from pursuing collections efforts, including foreclosure, until the bankruptcy case is closed.

However, this isn't always a slam dunk to prevent foreclosure. That stay can be lifted by request of the creditor. Could yours be subject to such a move? Here are five indicators that your situation qualifies for an exception.

1. You Plan to Let It Go. Whether or not your original goal was to keep your real estate, you may simply realize that it's not feasible. If you clearly indicate in court documents that you won't fight the return of that property to the lender, the court may let them move forward. 

2. The Repayment Plan Isn't Enough. Chapter 13 is a popular method to prevent foreclosure and repossession. But sometimes even stretching out past-due payments over several years still isn't enough. Keeping secured property is generally dependent on being able to bring loans current. If you can't realistically do that, it may be best to let that property go early. 

3. There's Nothing To Gain. If your home is subject to liquidation by the trustee in a Chapter 7 case, they aren't obligated to sell it. In fact, the trustee will do the math to determine if liquidation would net the estate enough to be worth the effort. If you have little or no equity in the home, it doesn't benefit other creditors. So returning it to the lender doesn't harm anyone, and the trustee may allow that. 

4. The Creditor Will Be Harmed. While bankruptcy is largely aimed at helping struggling debtors, creditor interests must also be served in order for the system to work. Trustees take into consideration whether or not the lender would be harmed financially by further delays. If that's likely, allowing foreclosure protects everyone's interests. 

5. You Can't Maintain It. Maintaining real estate can be expensive. While many maintenance and upkeep tasks can be put off until the bankruptcy is closed, some put the property at real risk. The most common issue is the debtor's inability to insure the property. Losing it to a disaster does no one any good, so it may need to be returned for its own protection. 

Where Can You Learn More?

Could the automatic stay be lifted for your real property? Should you work to avoid that or let it happen? And if you want to prevent it, how is this possible? Learn the answer to these questions and more by meeting with a qualified bankruptcy attorney in your state today. For more information, contact a bankruptcy attorney near you.