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When Can You Get a Relief from a Stay?

creditor rights.jpgWhen a business files for bankruptcy protection, they are generally granted an automatic stay. This stay temporarily protects the firm that filed for protection from most legal actions that could be taken by a creditor. This could include the halting of a foreclosure, halting any garnishment or putting a stop on any other type of debt collection activity. However, there are some scenarios where a creditor may be able to get relief from an automatic stay. If you have questions about motions for a relief from a stay, or automatic stays in general, please contact an experienced San Jose creditors' rights attorney for immediate assistance.

Relief from a Stay

The legal standard for relief from an automatic stay is set forth in Section 362(d) of the United States Code. Under the statute, secured creditors may be able to obtain relief from a stay when certain conditions are met. A secured creditor is a lender who holds a security interest in specific piece of property. The most common example is that of a mortgage lender, who has a security interest on the house in the case of non-payment. Under the statute, secured creditors may be able to obtain relief for:

  • Inadequate protection of their property interest: Since secured creditors have an interest in the property, they have the ability to seek protection against the diminution of the value of that interest. For example, if a mortgage lender's asset, the real estate, was losing value during the bankruptcy process, that lender, as a secured creditor, would likely be able to seek relief from an automatic stay. This could lead to them receiving compensation for the loss of value, or another form of compensation to make up for their damages.
  • Assets that are unnecessary for reorganization: This can only be done if a debtor lacks equity in a particular asset. A debtor has no equity in a particular piece of property when the value of the property is exceeded by total amount of all the debt, and any liens, against it. In that case, the creditor may seek relief from a stay, but only if they can prove that the particular asset is unnecessary for the successful reorganization of the company. This can be done by proving one of two things: first, the creditor can establish that the company could be successful without the particular asset, and second, the creditor can establish that the company is not reasonably likely to be able to successfully reorganize under any conditions. If either of these conditions are met, then any relief from a stay may be granted.

Contact Our Office Today

At Diemer, Whitman & Cardosi, LLP, our creditors' rights attorneys have extensive experience dealing with the California business bankruptcy process. If you have any trouble collecting on a debt, please contact our San Jose creditors' rights attorneys today at 408-971-6270. We are ready to protect you. Initial consultations are free of charge and we serve clients throughout Northern California.



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