Relief from the Automatic Stay

What is the automatic stay?  

The automatic stay is one of the fundamental debtor protections in bankruptcy. Once a debtor files a bankruptcy petition, the United States Bankruptcy Code prohibits any attempts to collect prepetition debts or to interfere with the debtor’s property. Upon filing the petition, this stay, or injunction, becomes effective automatically and without notice to creditors. Generally, the stay only terminates when the case is closed or dismissed, or the court grants the debtor discharge.

Practically, this means that lenders may not:

• Take any collection actions, even informal;
• Send notices of default;
• Obtain liens on property of the estate;
• Perfect liens by filing or possession;
• Foreclose on collateral;
• Repossess property of the estate; and
• Exercise any remedy provided for in a credit agreement.

To take action against a debtor that has filed for bankruptcy, a party in interest must file a motion for relief from the stay; otherwise, they may face federal sanctions.

Need help filing a motion for relief from the automatic stay? Schedule your consultation today with a top bankruptcy and restructuring attorney.

What are relevant laws related to filing a motion for relief from the automatic stay in Florida?

The federal bankruptcy code governs bankruptcy rather than state law, so Florida bankruptcy courts must abide by the bankruptcy code. 11 U.S.C. Section 362 provides the guidelines for the automatic stay. Importantly, it outlines actions that would violate the automatic stay, exceptions to the stay, grounds for relief from the stay, and the sanctions for violating the stay.

However, each district court has its own local procedural rules and requirements, and it’s essential to check the rules that apply in your jurisdiction. For example, Florida’s three bankruptcy district courts (the Middle, Northern, and Southern Districts) have separate local rules. To see what rules may apply to your unique situation, please contact our office to set up your initial consultation.

What is required to establish grounds for relief from the automatic stay?

To establish grounds for relief from the automatic stay, under 11 U.S.C. Section 362(d)(1)-(4), the movant must establish one or more of the following:

• The stay should be lifted “for cause,” which typically requires a showing of significant harm or prejudice to the creditor that outweighs the debtor’s interest in the automatic stay;
• The property the creditor seeks to take action against is not necessary for an effective bankruptcy reorganization;
• The bankruptcy case is a single asset real estate case, as defined in 11 U.S.C. Section 101(51B); or
• The bankruptcy petition was part of a scheme to delay, hinder, and defraud creditors.

The creditor must provide notice of the motion to the debtor and other interested parties, such as other creditors or trustees, and allow sufficient time to file objections. Ultimately, the decision to grant or deny a motion for relief from the automatic stay is within the bankruptcy court’s discretion. The court may consider various factors in making its decision. The discretionary forms of relief include the following: :

• Termination of the automatic stay
• Annulment of the automatic stay
• Modification of the automatic stay
• Placing specific conditions on the continuation of the stay

When a set of facts is appropriate to establish grounds for relief from the automatic stay, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies.

To see what actions may be available for your unique situation, please contact our office to set up your initial consultation.

What are common defenses to motions for relief from the automatic stay?

The primary defenses to a motion for relief from the automatic stay include the following:

• Lack of standing: The creditor may not have the legal right to pursue the debt or to seek relief from the automatic stay.
• Failure to meet legal requirements: The creditor may have failed to meet the procedural and evidentiary requirements for seeking relief from the automatic stay, such as providing proper notice to the debtor and other interested parties or establishing sufficient cause for relief.
• Good faith: The debtor may argue that they are acting in good faith and that the continuation of the automatic stay is necessary to enable them to reorganize their finances and repay their debts.
• Equity and fairness: The debtor may argue that the harm or prejudice to the creditor outweighs the potential harm to the debtor if the court grants relief from the automatic stay.
• Counterclaims: The debtor may assert counterclaims against the creditor or raise defenses related to the underlying debt, such as lack of consideration, fraud, or usury.

To see what defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Have more questions about a bankruptcy-related situation?

Crucially, this overview of filing motions for relief from the automatic stay does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.