Stay Relief (Relief from Automatic Stay)

When Do Creditors Seek Relief from Stay?

Secured creditors seek stay relief when the automatic stay is preventing them from reaching their collateral. Common scenarios:

• Mortgage foreclosure: The lender's foreclosure was halted by the bankruptcy filing and the debtor is not making post-petition payments or curing the default
• Vehicle repossession: The auto lender wants to repossess a vehicle when the debtor is not making payments and the vehicle is depreciating
• Serial filing: The debtor has filed multiple bankruptcies primarily to delay foreclosure without a genuine intent to reorganize
• No equity/not necessary: The debtor has no equity in the property and the property isn't necessary for an effective reorganization.

What Are the Grounds for Stay Relief?

Section 362(d) provides four grounds:

1. Cause, including lack of adequate protection (§ 362(d)(1)): The broadest ground. The creditor argues their interest in the collateral is not adequately protected — the property is declining in value, the debtor is not insured, or no payments are being made. The debtor can respond by offering adequate protection (payments, additional liens, or maintaining insurance).
2. No equity + not necessary (§ 362(d)(2)): Two-part test requiring (a) the debtor has no equity in the property and (b) the property is not necessary for an effective reorganization. Both prongs must be met. In Chapter 7, property is rarely 'necessary for reorganization' since there is no reorganization.
3. Single-asset real estate (§ 362(d)(3)): This rule covers a single income-producing property or project that provides substantially all of the debtor's gross income. It excludes family farmers and residential property with fewer than four units, and allows no substantial business beyond operating the property and related activities. To avoid relief under this rule, the debtor must act by the later of 90 days after the order for relief or 30 days after the court determines that the rule applies. The debtor must file a plan with a reasonable possibility of timely court approval or start the required monthly interest payments. The 90-day period can be extended for cause on a timely request.
4. Acts of the debtor (§ 362(d)(4)): If the debtor filed the bankruptcy as part of a scheme to defraud involving multiple filings or transfers, the court can grant in rem relief — a 2-year order preventing the automatic stay from attaching to the property in any future filing.

The Stay Relief Hearing

The process follows a compressed timeline:

1. Motion filed: The creditor files a motion with supporting evidence (payment history, appraisal, insurance status)
2. Notice: The debtor, trustee, and other parties receive notice, generally at least 7 days before the hearing unless the court or another rule sets a different period.
3. Preliminary hearing: The court may hold a preliminary hearing or combine it with the final hearing. The stay on actions against estate property can end for the creditor requesting relief 30 days after the request unless the court continues it. In individual Chapter 7, 11, and 13 cases, a separate rule ends the stay 60 days after the request. The exceptions are a final court decision, an extension all parties in interest agree to, or a specific extension for good cause.
4. Burden of proof: The creditor has the initial burden on the 'no equity' prong. The debtor/trustee bears the burden on all other issues, including adequate protection and necessity for reorganization.
5. Final hearing: If the preliminary hearing is continued, the court must complete the final hearing within 30 days of the preliminary hearing.

How Debtors Defeat Stay Relief Motions

In Chapter 13, debtors commonly defeat stay relief by demonstrating:

• The proposed plan will cure all mortgage arrears over the plan term
• Post-petition mortgage payments are current (or the debtor will become current)
• The property is adequately insured
• The debtor has equity in the property (defeating the 'no equity' prong)

In Chapter 7, even if the debtor is surrendering the property, opposing stay relief can protect nonexempt estate value for creditors.

In Rem Stay Relief

Under § 362(d)(4), the court can enter an order that prevents the automatic stay from attaching to a specific property in any bankruptcy case filed within 2 years. This powerful remedy targets serial filers who file successive bankruptcies solely to delay foreclosure. The order attaches to the property, not the debtor — even if a different person files bankruptcy, the stay does not protect that property.