But you stop paying the car loan or mortgage. They need to take action (or so they say). How do they do it?
A creditor can ask a bankruptcy judge to lift the automatic stay, but they must prove at a hearing that there’s a good reason to do so. An example would be when you have no equity in the property or when the property is not insured. Another example might be when a creditor needs to continue a lawsuit in order to pursue your insurance coverage (if you’ve been in a car accident and the insurance company has not paid the claim, the car lender will need to take action).
When the judge orders that the automatic stay is lifted, such action does not automatically give the creditor ownership of the property. It merely allows them to pursue their out-of-bankruptcy remedies to foreclose or repossess the property.
For more information regarding chapter 7 bankruptcy in California, click here.