Bankruptcy

Motions for Relief From The Automatic Stay and Reducing Bankruptcy Costs

By Adrian Lapas, Eastern North Carolina Bankruptcy At

We all want to save money.  Especially when you have filed for bankruptcy protection under chapter 13 and saving money is at a premium.  One tip to save a lot of money is to ensure that you continue to make your secured debt payments if those payments are made directly to the secured creditor or, as referred to in bankruptcy parlance, “outside the plan.”

Often in chapter 13 cases, debts that are secured by collateral, typically a car or a house, are paid outside the plan with the payments being made directly to the secured creditor.  For example, if you have a car that you cannot “cram-down” in your plan or the obligation is outside the plan for other reasons, if you do not timely make your payments to the creditor as required, your creditor will not be happy.  

The creditor will then file a Motion for Relief from the Automatic Stay essentially telling the court and asking the court that (a) the debtor is not making the required payments and (b) the creditor should be allowed to repossess the collateral.  Often, when a Motion for Relief from the Automatic Stay is filed, a resolution can be negotiated whereby the amounts that you are behind on this obligation are cured in some form or fashion.  So far, so good.

However, the bankruptcy court will often allow the creditor to include in their claim the attorney’s fees incurred by the creditor in filing the Motion for Relief from the Automatic Stay as well as the filing fee paid to the court.  In addition, the court will often allow an attorney’s fee to debtor’s counsel for responding to the Motion and negotiating a resolution.  All told, these additional fees can sometimes range up to $1,000.00.  While, in my district, these fees are generally paid through your bankruptcy plan, it creates a real cost to you and can cause your chapter 13 plan payment to increase to accommodate the increased costs.

Therefore, in order to keep your costs to a minimum, it is important to maintain your payments to the creditors that are being paid “outside the plan.”  If making these payments is too burdensome, it may be time to re-think keeping that collateral.

Full post as published by Bankruptcy Law Network on June 08, 2010 (boomark / email).