Bankruptcy in Brief
a service of the Moran Law Group
Relief from stay
Filing bankruptcy automatically stays (stops)
most actions against the debtor or the debtor's property such as foreclosures,
lawsuits, or garnishments. 11 U.S. C. 362.
The stay is designed to preserve
the debtor's property and to give the debtor a break from litigation. The stay is
neither absolute nor permanent.
When can a creditor get "relief" from that stay
One seeking relief from the stay to go forward
against the debtor or his property must show the bankruptcy judge, after a hearing, that
there is "cause" for the granting of relief ( which might include showing that
the creditor's interest in particular property is not "adequately protected") ,
or showing that the debtor has no equity in the property and that the property is not
needed for a reorganization.
Most often, it is the secured creditor who wants
relief from stay to foreclose on real estate or to repossess a car. Creditors
can frequently get relief from the stay to foreclose on property in which the debtor has
no equity or where the property is not insured. Where the equity cushion (the
difference between the creditor's claim and the value of the property) is small, the
debtor may have to make "adequate protection payments" to the creditor to
preserve the equity cushion for the creditor's benefit as a condition of the stay
remaining in effect.
Sometimes, creditors want relief from stay to
pursue the debtor's insurance coverage. Such relief is generally granted if the creditor agrees
to limit the collection of his judgment to the insurance. Another common situation
is the multi-party case where the plaintiff does not want to try the case without
the debtor being a party (which would be the result if the stay is not lifted).
Judges vary on their approach to these cases: some judges insist that the debtor be
severed from the case and tried against the other defendants; others will grant
relief, with some restrictions on the creditor's rights against the debtor should the
creditor get a judgment.
When relief from stay is granted,
it does not remove the property from the estate or grant the creditor ownership of the
property. It simply removes the stay and restores the parties to their state law
rights and permits the creditor to enforce those rights to the extent that the relief from
stay order permits. Thus, if a mortgage holder gets relief from stay, it doesn't
grant the creditor ownership of the collateral, it just frees the creditor to exercise
whatever remedies the creditor had outside of bankruptcy.
To get relief from stay, you need a lawyer.
The lawyer needs information about the claim against the debtor or the debtor's
property; information about the value of any collateral for the debt; and
information about other liens or claims against the property. Relief from stay
motions are generally heard on short notice (10-20 days); the court may grant relief
at the initial hearing or set an evidentiary hearing to make a final decision.
Finding a lawyer
more on creditor issues in