The collapse in the real estate market and plunging home values is one of the many reasons for the rise in Bankruptcy filings. This coupled with the fact that working families are falling victim to job loss has resulted in Bankruptcy filings reaching record levels.
Over the last three years, as the economic recession lingered and the recovery became more and more tentative, 4 million consumers filed for bankruptcy matching the records levels reached before the 2005 changes in the Bankruptcy Act made it more difficult and costly for Americans to seek Bankruptcy protection.
A principal reason for a rise in bankruptcy filings is the increase in the foreclosure rates. Since the 2008 crash these record foreclosures have forced homeowners and investors alike to seek the protection of Bankruptcy Act and in order to stay the foreclosure and protect their homes.
The filing of a bankruptcy case, under any chapter of the Bankruptcy Code, automatically triggers an injunction against foreclosure by a bank or other secured lender against the debtor's property, including the debtor's home or other real estate. 11 U.S.C. 362.
The " automatic stay" provides a respite for the debtor by stopping the foreclosure. In this period negotiations can take place to try to resolve the difficulties in the debtor's financial situation, subject to the oversight of the bankruptcy judge
The relief provided by the automatic stay, however, is not without limits. A court may allow a creditor relief from the stay if the creditor can show that the stay jeopardizes the creditor's interest in the property.
In the context of a foreclosure on real property, what this means, is that in order for the stay to remain in effect the real property owner, must demonstrate that the interest of the creditor in the property is not damaged by the stay.
Practically speaking, this means one of two things. First, that there is so much equity in the property that a temporary stay will not impair the creditors security. Unfortunately, however, in today's real estate market most debtors do not have sufficient equity to provide "adequate protection." In such situations, in order for the stay to remain in effect the debtor will be required to make periodic cash payments in the form of monthly payments to the creditor so that the creditors' interest in the real property is not further impaired by bankruptcy and its stay.
If the debtor is unable to provide "adequate protection" to the secured creditor, creditor can obtain an order from the court granting permission to continue the foreclosure.
Over the last three years, as the economic recession lingered and the recovery became more and more tentative, 4 million consumers filed for bankruptcy matching the records levels reached before the 2005 changes in the Bankruptcy Act made it more difficult and costly for Americans to seek Bankruptcy protection.
A principal reason for a rise in bankruptcy filings is the increase in the foreclosure rates. Since the 2008 crash these record foreclosures have forced homeowners and investors alike to seek the protection of Bankruptcy Act and in order to stay the foreclosure and protect their homes.
The filing of a bankruptcy case, under any chapter of the Bankruptcy Code, automatically triggers an injunction against foreclosure by a bank or other secured lender against the debtor's property, including the debtor's home or other real estate. 11 U.S.C. 362.
The " automatic stay" provides a respite for the debtor by stopping the foreclosure. In this period negotiations can take place to try to resolve the difficulties in the debtor's financial situation, subject to the oversight of the bankruptcy judge
The relief provided by the automatic stay, however, is not without limits. A court may allow a creditor relief from the stay if the creditor can show that the stay jeopardizes the creditor's interest in the property.
In the context of a foreclosure on real property, what this means, is that in order for the stay to remain in effect the real property owner, must demonstrate that the interest of the creditor in the property is not damaged by the stay.
Practically speaking, this means one of two things. First, that there is so much equity in the property that a temporary stay will not impair the creditors security. Unfortunately, however, in today's real estate market most debtors do not have sufficient equity to provide "adequate protection." In such situations, in order for the stay to remain in effect the debtor will be required to make periodic cash payments in the form of monthly payments to the creditor so that the creditors' interest in the real property is not further impaired by bankruptcy and its stay.
If the debtor is unable to provide "adequate protection" to the secured creditor, creditor can obtain an order from the court granting permission to continue the foreclosure.
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