What is a Motion for Relief from the Stay?

A motion for relief from the automatic stay is a common motion brought by a creditor, who wishes to take action that would otherwise be barred by the bankruptcy automatic stay. Most frequently, a motion for relief seeks court permission to foreclose on real estate or repossess a car or other vehicle. A motion might also be brought to in order to continue a legal proceeding outside of bankruptcy.

If a debtor plans to surrender property to a lender instead of paying the debt, it is common for the creditor to seek relief from the stay so it can immediately move forward on selling the asset. In some situations, it makes sense for the debtor to consent to relief consistent with his or her planned release of the property.

Other times, a motion for relief from the stay may become a contested matter. The secured creditor bringing the motion may have become uncomfortable with the way their claim is being paid (or not paid). In an ordinary case, there are two grounds potential asserted by the creditor for seeking relief. The first is "for cause" which includes a lack of "adequate protection" (a term of art). Case law is voluminous in this area, but reasons asserted might include the asset depreciating faster than payments being made, a lack of insurance coverage, or some other danger to value of the property. The second grounds are a combination of lack of equity and the property being not necessary to an effective reorganization. Basically, a creditor may seek relief on those grounds when the property is underwater, i.e. the debtor owes more than it is worth, and it does not serve an important purpose in the debtor's continued financial life. There is a potential for significant disagreement between a creditor and a debtor over whether relief from the stay is proper.

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