A “motion for relief from stay” is a request by a creditor after the 341 hearing to be allowed to continue collection and or foreclosure activities on a property listed as an asset when a debtor filed for bankruptcy. The “stay” is the automatic stay that bankruptcy law grants a filing debtor, requiring all creditors to cease collection and foreclosure activities while the bankruptcy proceeds. When an asset that is listed on the asset and liabilities filing along with the bankruptcy request is identified by the court appointed trustee that the asset will not be included as a seize-able asset, the creditor involved is allowed to request that the automatic stay be lifted for that asset so that the creditor can continue receivables actions. In the situation being discussed here, the bankruptcy court judge has apparently approved the motion, so that for this asset only, the creditor is allowed to go back to business as it was before the bankruptcy. What does this mean to the debtor? It depends on what the situation was before the bankruptcy filing.
As for the “abandonment” portion of the motion, it is simply a legal phrasing that indicates to the debtor and creditor alike that the bankruptcy trustee will not seize the property for liquidation and is “abandoning” the asset back to the debtor. When an asset is listed in the bankruptcy filing the appointed trustee is obliged to determine what the true worth of the asset is. If it has worth beyond the estimated purchased price, then the trustee wants to seize it, sell it, and pay off some of the debt to the creditors. In the 341 hearing the trustee interviews the debtor to assist in this value assessment. After the hearing the trustee must document his or her decisions on the assets, file it with the court, and this becomes the heart of the discharge statement. It is on this discharge statement that the asset found to be of insufficient worth is listed as such and “abandoned” back to the debtor. This sets the stage for the creditor to file the relief motion.
The only hitch in the motion and the ability of the creditor to pursue its monies would be if the debtor and creditor for some reason conspired to have the asset’s value perceived to be lower that it truly was. This might fool the trustee who would abandon the asset. Then the creditor can foreclose or repossess the asset after the discharge. If this is true, there were a number of people and experts with tales to tell how five years later the trustee reopened the discharge, had the entire bankruptcy dismissed and had the debtor, and creditor if applicable, put up on charges in Federal District Court. That is very bad business, indeed.
But, that aside, the debtor will now face whatever plans the creditor has on the mortgage and or asset. If the debtor is up to date on the mortgage, or is able to catch up quickly, given the change in financial affairs out of the bankruptcy, then there should be no change in the relationship with the creditor just because a bankruptcy occurred. Otherwise, the creditor will likely foreclose.