When a Debtor files for bankruptcy, the procedure triggers a statutory provision known as an automatic stay. The stay is a mechanism by which a debtor can stop creditors from collecting on the debts owed. Filing for bankruptcy may be a suitable option for a person facing foreclosure. However, as a creditor, it is important to consider all available legal options when facing a bankruptcy proceeding. Creditor’s rights lawyers ensure that all options are considered to preserve creditors’ rights.
Loan Contract
Purchase of a property through a loan with a bank will include a contract. Through the contract, the buyer, also known as a debtor, promises to make timely payments on the loan to the creditor. The contract ensures that the property is the collateral in the loan. The lender can possess the home and sell it to recover the loans made to the debtor in case of default.
Foreclosure and Automatic Stay
When the buyer fails to make timely payments and starts to fall behind on the loan, the state laws allow the lender to initiate foreclosure proceedings. At the end of the foreclosure proceeding, a creditor may also obtain a personal judgment if the property was not sold for enough to cover the debt owed. However, when the debtor files for bankruptcy, the automatic stay will allow the debtor some time to consider other options for paying the debt. Once the automatic stay is in place, the lender cannot attempt to collect on the debt. If the lender attempts to collect, it can be sued for violating the automatic stay.
Motion for Relief from Stay
A creditor can file a motion for relief from automatic stay. Courts will grant the motion if the creditor can show that the debtor has cause for the grant of the relief. Usually, this is evident when a debtor has no equity in the property because he has not made any payments on the loan or has not worked out a payment arrangement to preserve his equity, and has not made payments during the bankruptcy. The relief from stay does not automatically allow the creditor to sell the property. It only serves to remove the property from the bankruptcy proceedings so that the creditor may pursue options outside of bankruptcy court.
Creditors hands are not necessarily tied in the face of a bankruptcy filing by the debtor. The rules and regulations for foreclosure, bankruptcy, and other remedies and procedures available to creditors are daunting and hard to decipher. Engaging an attorney to help understand the various options and procedures can provide relief and protect investments.
Towson Real Estate Lawyers at Huesman, Jones & Miles, LLC Handle Issues Involving Foreclosures
Business success is not based on profits alone, a major aspect of the success of a business also depends on its ability to collect debts. The Towson real estate lawyers at Huesman, Jones and Miles, LLC have considerable expertise in debt collection and will handle the issues that arise when faced with a debtor who has declared bankruptcy. Call our office at 443-589-0150 or contact us online for a free consultation. Located in Towson and Hunt Valley, Maryland, we serve clients from the surrounding areas, including Baltimore, Baltimore County, Bel Air, Columbia, Westminster, Essex, Monkton, Sparks, Parkton, Pikesville, Carroll County, Harford County, and Howard County.
