Legal Definitions - motion to lift the stay

A motion to lift the stay is a formal request made to a bankruptcy court by a party seeking permission to take a specific action against a debtor or their property, even though an "automatic stay" is in effect.

When an individual or business files for bankruptcy, an immediate legal protection called an automatic stay goes into effect. This stay acts as a powerful injunction, temporarily stopping most collection efforts, lawsuits, foreclosures, repossessions, and other actions against the debtor and their assets. It provides the debtor with a breathing period and allows the bankruptcy court to organize their financial affairs. However, in certain circumstances, a creditor or another interested party may ask the court to "lift" or remove this protection for a particular action, arguing that their interests are being unfairly harmed or that the stay is no longer appropriate for a specific asset or situation.

Here are some examples:

• Car Lender Seeking Repossession: Imagine a person files for bankruptcy, and they still owe money on their car. The automatic stay prevents the car loan company from repossessing the vehicle. However, if the debtor has stopped making payments for several months, and the car's value is rapidly decreasing, the loan company might file a motion to lift the stay. They would argue to the court that their collateral (the car) is losing value and is not adequately protected, and they need permission to repossess it to minimize their financial loss.

• Landlord Seeking Eviction: A tenant files for bankruptcy while owing several months of back rent. The automatic stay prevents the landlord from continuing with an eviction lawsuit or taking steps to remove the tenant from the property. The landlord might file a motion to lift the stay, asking the bankruptcy court for permission to proceed with the eviction process in state court. They would explain that they are suffering ongoing financial losses due to unpaid rent and cannot regain possession of their property to rent it to someone else.

• Divorcing Spouse Seeking Property Division: A couple is in the middle of a divorce, and one spouse files for bankruptcy. The automatic stay can halt the division of marital assets, as these assets are now considered part of the bankruptcy estate. The other spouse, who is not in bankruptcy, might file a motion to lift the stay. They would request that the bankruptcy court allow the state divorce court to proceed with the equitable distribution of marital property, arguing that the bankruptcy should not indefinitely delay the finalization of their divorce and their right to their share of the assets.