Automatic Stay Under 11 U.S. Code § The filing of a bankruptcy immediately operates as an automatic stay of all actions against a debtor and his or her property. 11 U.S.C. §(a). If the debtor files for bankruptcy under Chapter 13, the automatic stay extends to any individual who is liable on a consumer debt with the debtor. Jan 14, · Section (b) (22) is subject to section (l) of the Bankruptcy Code, which sets forth a series of requirements for the application of the automatic stay, including payment of postpetition rent and evidence that the debtor could cure the monetary default that gave rise to the judgment for possession. Although the bankruptcy court confirmed that sections (b) (22) and (l) of the . Section (b)(7) of the House amendment permits the issuance of a notice of tax deficiency. The House amendment rejects section (b)(7) in the Senate amendment. It would have permitted a particular governmental unit to obtain a pecuniary advantage without a hearing on the merits contrary to the exceptions contained in sections (b)(4) and (5).
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The debtor objected to the lift-stay motion on the basis that a possessory interest in real property, even without any accompanying legal interest, is sufficient to trigger protection of the automatic stay.
The debtor also argued presumably to keep the stay in effect long enough to vacate the state court judgment that he was not represented by counsel in the state court proceedings and had been unable to explain to the court that he was the victim of a scheme whereby the landlord fraudulently divested him of his interest in the property.
With respect to a residential tenant, section b 22 of the Bankruptcy Code applies and provides that the filing of bankruptcy petition does not operate as a stay of the continuation of an eviction or other proceeding by a lessor against a debtor involving residential real property in which the debtor resides as a tenant under a lease or rental agreement and with respect to which the lessor has obtained a judgment for possession prepetition.
Section b 22 is subject to section l of the Bankruptcy Code, which sets forth a series of requirements for the application of the automatic stay, including payment of postpetition rent and evidence that the debtor could cure the monetary default that gave rise to the judgment for possession.
Although the bankruptcy court confirmed that sections b 22 and l of the Bankruptcy Code apply generally in residential cases, the court questioned whether section b 22 applied to the specific facts before it.
The landlord conceded that here there was no lease. A rental agreement, on the other hand, is a short-term agreement for the use of premises in exchange for the payment of rent. The landlord argued the stipulation was in effect a rental agreement because the parties had agreed the debtor would occupy the property in exchange for consideration.
The bankruptcy court found that the payments made under the stipulation were not rent because they were not payments for the use and occupation of land; therefore, there was no rental agreement and section b 22 of the Bankruptcy Code did not apply as an exception to the automatic stay.
The contents of this website may contain attorney advertising under the laws of various states. Prior results do not guarantee a similar outcome. Automatic Stay. Jan 14, More from the Bankruptcy Blog. Section e of the House amendment represents a modification of provisions in H.
In order to insure that those hearings will in fact occur within such day period, it is anticipated that the rules of bankruptcy procedure provide that such final hearings receive priority on the court calendar. Section g places the burden of proof on the issue of the debtor's equity in collateral on the party requesting relief from the automatic stay and the burden on other issues on the debtor.
An amendment has been made to section b to permit the Secretary of the Department of Housing and Urban Development to commence an action to foreclose a mortgage or deed of trust. The commencement of such an action is necessary for tax purposes. The section is not intended to permit the continuation of such an action after it is commenced nor is the section to be construed to entitle the Secretary to take possession in lieu of foreclosure. Automatic stay: Sections b 8 and 9 contained in the Senate amendment are largely deleted in the House amendment.
Those provisions add to the list of actions not stayed a jeopardy assessments, b other assessments, and c the issuance of deficiency notices. In the House amendment, jeopardy assessments against property which ceases to be property of the estate is already authorized by section c 1.
Other assessments are specifically stayed under section a 6 , while the issuance of a deficiency notice is specifically permitted. Stay of the assessment and the permission to issue a statutory notice of a tax deficiency will permit the debtor to take his personal tax case to the Tax Court, if the bankruptcy judge authorizes him to do so as explained more fully in the discussion of section The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws.
It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.
The action commenced by the party seeking relief from the stay is referred to as a motion to make it clear that at the expedited hearing under subsection e , and at hearings on relief from the stay, the only issue will be the lack of adequate protection, the debtor's equity in the property, and the necessity of the property to an effective reorganization of the debtor, or the existence of other cause for relief from the stay.
This hearing will not be the appropriate time at which to bring in other issues, such as counterclaims against the creditor, which, although relevant to the question of the amount of the debt, concern largely collateral or unrelated matters. This approach is consistent with that taken in cases such as In re Essex Properties, Ltd.
Those counterclaims are not to be handled in the summary fashion that the preliminary hearing under this provision will be. Rather, they will be the subject of more complete proceedings by the trustee to recover property of the estate or to object to the allowance of a claim. However, this would not preclude the party seeking continuance of the stay from presenting evidence on the existence of claims which the court may consider in exercising its discretion.
What is precluded is a determination of such collateral claims on the merits at the hearing. Paragraph 7 [of subsec. As with all other paragraphs of subsection a , this paragraph does not affect the right of creditors. Subsection c governs automatic termination of the stay. Subsections d through g govern termination of the stay by the court on the request of a party in interest.
Subsection d requires the court, on request of a party in interest, to grant relief from the stay, such as by terminating, annulling, modifying, or conditioning the stay, for cause.
The lack of adequate protection of an interest in property of the party requesting relief from the stay is one cause for relief, but is not the only cause. As noted above, a desire to permit an action to proceed to completion in another tribunal may provide another cause. Other causes might include the lack of any connection with or interference with the pending bankruptcy case. For example, a divorce or child custody proceeding involving the debtor may bear no relation to the bankruptcy case.
In that case, it should not be stayed. A probate proceeding in which the debtor is the executor or administrator of another's estate usually will not be related to the bankruptcy case, and should not be stayed. Generally, proceedings in which the debtor is a fiduciary, or involving postpetition activities of the debtor, need not be stayed because they bear no relationship to the purpose of the automatic stay, which is debtor protection from his creditors.
The facts of each request will determine whether relief is appropriate under the circumstances. Subsection e provides a protection for secured creditors that is not available under present law.
The subsection sets a time certain within which the bankruptcy court must rule on the adequacy of protection provided of the secured creditor's interest. If the court does not rule within 30 days from a request for relief from the stay, the stay is automatically terminated with respect to the property in question. In order to accommodate more complex cases, the subsection permits the court to make a preliminary ruling after a preliminary hearing. After a preliminary hearing, the court may continue the stay only if there is a reasonable likelihood that the party opposing relief from the stay will prevail at the final hearing.
Because the stay is essentially an injunction, the three stages of the stay may be analogized to the three stages of an injunction. The filing of the petition which gives rise to the automatic stay is similar to a temporary restraining order. The preliminary hearing is similar to the hearing on a preliminary injunction, and the final hearing and order is similar to a permanent injunction. The main difference lies in which party must bring the issue before the court.
While in the injunction setting, the party seeking the injunction must prosecute the action, in proceedings for relief from the automatic stay, the enjoined party must move.
The difference does not, however, shift the burden of proof. Subsection g leaves that burden on the party opposing relief from the stay that is, on the party seeking continuance of the injunction on the issue of adequate protection. At the expedited hearing under subsection e , and at all hearings on relief from the stay, the only issue will be the claim of the creditor and the lack of adequate protection or existence of other cause for relief from the stay.
This hearing will not be the appropriate time at which to bring in other issues, such as counterclaims against the creditor on largely unrelated matters. Rather, they will be the subject of more complete proceedings by the trustees to recover property of the estate or to object to the allowance of a claim. Section 5 a 3 of the Securities Investor Protection Act of , referred to in subsecs. The National Housing Act, referred in subsec. For complete classification of this Act to the Code, see section of Title 12 and Tables.
The Merchant Marine Act, , referred to in subsec. Section of the Act is classified to section of Title 46, Appendix. For complete classification of this Act to the Code, see section of Title 46, Appendix, and Tables. The Higher Education Act of , referred to in subsec. Section j of the Act is classified to section j of Title