Upon filing of a bankruptcy case, the automatic stay immediately kicks in. The importance of the stay instantly kicking in cannot be understated. Many debtors wind up filing the day before a foreclosure sale or a car repossession, so without the immediacy of the stay, they would lose their house or car.
While the stay gives the debtor a lot of relief at the filing of the bankruptcy case, the stay is not necessarily permanent. The stay can expire over time with respect to personal property, but the most common way the stay expires is upon a creditor filing and winning emotion to Lift Stay.
A Motion to Lift Stay is filed by the creditor during the pendency of the bankruptcy case almost exclusively for the purpose of repossessing its collateral. In simple terms, a lift stay motion is almost always filed by a creditor to get back its car or its home. Without the stay being lifted, the stay remains in effect, and it is the stay that keeps the creditor from taking back its collateral from the debtor.
Note that the motion filed by the creditor is not technically asking for money. It is technically asking only for its collateral. It cannot ask the debtor for money, since that would be a violation of the bankruptcy code. This begs the question, what would cure the problem for the creditor? The answer is of course money.
The creditor should only bring the action if the debtor is behind in its payments. The creditor brings the motion arguing that its collateral is not being adequately protected; therefore, if the debtor is current in its payments, then the creditor has no room to argue that its interests are not being adequately protected. Remember, just because a debtor has filed bankruptcy does not mean it cannot retain its house or its car. As such, if the debtor has made and continues to make timely payments on these items, the creditor should not be bringing a lift stay motion and should not get an order granting that motion.
So how can the debtor fight a lift stay? The debtor can fight it in several ways. The debtor could get current on its payments, which would deny the creditor its adequate protection argument. The debtor could also fight the creditors standing to bring the motion. This often happens in mortgages, where the creditor bringing the motion might not have proof that it has received the deed or note via an assignment. The debtor could also settle with the creditor. The creditor might agree to not lift the stay in consideration for the debtor getting current in a set number of days.
If the stay is lifted, then the creditor is free to pursue its collateral according to state law methods. In other words, the creditor can go after its collateral in the same methods it could have done prior to the debtor filing bankruptcy once the stay has been lifted. That is why a debtor who intends to continue to use the collateral in its bankruptcy estate cannot afford to ignore a lift stay motion.