When a person files for bankruptcy, they are beginning a complicated legal proceeding that involves multiple moving levers. Doing so creates obligations for both debtors and creditors, while also initiating certain court proceedings automatically. One of those automatic court proceedings is known as an “automatic stay” and originates from Title 11 of the United States Code, Chapter 3, section 362. In this article we will briefly explain what the automatic stay is, and then focus on how a party can petition the court for relief from the stay.
What is the Automatic Stay, and Why Does it Exist?
Once a debtor has filed for bankruptcy, the courts grant him certain protections, stopping (that is, staying) most court proceedings against him and stopping creditors’ attempts to collect on their debts. These protections are created and put into effect by the automatic stay, which prevents parties: (1) from commencing judicial proceedings against the debtor, (2) from acting to obtain possession of the debtor’s property, (3) from collecting, assessing, or recovering a claim against the debtor, and (4) from creating, perfecting, or enforcing any lien against property of the debtor’s estate.
The automatic stay is meant to balance the interest of debtors and creditors. The stay is intended to aid debtors by giving them breathing room to create and follow a reorganization plan. This process is then, in turn, meant to benefit creditors by allowing debtors to effectively satisfy their existing debts–a process which is made to flow more efficiently when debtors need not worry that creditors are scrambling to the courts in a rush for debtors’ assets.
Relief from the Automatic Stay
Ordinarily, the automatic stay will continue to stop acts against property of the debtor’s estate until that property is no longer property of the estate. The stay of any other act continues until the cases is closed or dismissed.
A party might wonder whether anything can be done to grant relief from the automatic stay, so that proceedings against debtors can be commenced or resumed prior to the stay’s ordinary endpoint. The bankruptcy courts have the ability to grant such relief, if they determine that relief would be proper. A party seeking relief must begin a motion for relief from the automatic stay. A motion is a written formal statement in which a party requests some relief from the court. The parties against whom the relief is requested, the debtor and the trustee, are the respondents.
In order to obtain relief, the movant must file two documents along with a motion for relief from the automatic stay: a statement of amount due and a certification.
The movant must file a statement of amount due, listing, wherever applicable, amounts such as the unpaid principal, various types of interest accrued, late fees, attorney’s fees, advances for taxes and insurance, arrearage, and date of last payment. If the amount claimed due is secured by a mortgage on real property, the movant must file Local Form Certification Regarding Calculation of Amount Due, which will act as this statement.
The movant must also file a certification containing, where applicable, any notes, bonds, mortgages, security agreements, financing statements, assignments, and appraisals.
When a movant alleges that the debtor has failed to make a post-petition mortgage or vehicle payment, the party must file a Local Form for those mortgages or vehicle payments.
How Does a Party File a Motion for Relief from the Automatic Stay?
There is a basic structure to motions filed in the New Jersey Bankruptcy Court. There are certain necessary documents that form a motion, as well as a filing fee. The necessary documents include: (1) a Notice of Motion; (2) a Certification of Facts; (3) a Memorandum; (4) a Certification of Service; and (5) a Proposed Order. Each of these documents must be signed and dated. The movant must provide one original set of documents and one copy when submitting the motion to the clerk’s office.
1. Notice of Motion
The notice of motion must state the date, time, and place of the hearing. Hearing dates and times for each judge are available on the court’s website. If the judge decides to grant the order for relief from the automatic stay, the Federal Bankruptcy Rules ordinarily impose a separate 14-day stay, during which the order is unable to go into effect. A request for a waiver of that 14-day stay must appear in the notice of motion.
2. Certification of facts
The certification of facts is a document submitted to the court that solely contains facts of which the signing party has personal knowledge.
3. Memorandum
The memorandum is the document that states the legal basis for the relief requested. It contains the movant’s argument for granting relief from the automatic stay, citing to the Bankruptcy Code and case law to establish the movant’s argument.
4. Proposed Order
The proposed order is a separate document stating that the motion is granted. It has no legal effect if the judge does not in fact grant the motion, but rather serves as a hypothetical grant of the motion, pending the judge’s approval. The title of the proposed order must identify the relief sought. The proposed order must use the Local Form Order Template.
5. Certification of Service
The Local Form Certification of Service is a document in which the movant’s counsel attests that the appropriate parties have been timely served with the motion, listing each party, each party’s relationship to the case, and the mode of service by which that party has been served.
6. A filing fee of $188.00
The current filing fee for a motion for relief from the automatic stay is $188.00, payable in the form of cashier’s check, money order, credit card, or cash (personal checks are not an acceptable form of payment). This filing fee applies to any party seeking to file the motion.
What is Service?
The movant is responsible for serving the motion on all the parties involved at least 21 days before the hearing date. Those parties include the debtor, the debtor’s attorney, the trustee, and any other party known to claim an interest in the property, rents, issues, profits, or proceeds.
Service can be accomplished in several ways, but the easiest method is to mail the filed and stamped motion by first class mail postage prepaid to the respondent’s residence or the place where the respondent regularly conducts business. It is important to note that service must be served by non-electronic means; service by email is NOT proper service.
What Happens After the Motion is Filed?
Once the motion and its accompanying documents have been submitted to the court, the respondent will have the opportunity to object within 7 days of being served notice of the motion. How the motion proceeds next will depend upon whether the respondent files an objection to the motion for relief.
What Happens if an Objection to the Motion for Relief is Filed?
Once an objection is filed, the parties must confer before the hearing and determine whether the issue can be resolved. If the issue can be resolved and the parties either settle the motion or the movant withdraws the motion, the movant must immediately notify chambers and file Local Form Status Change Form. If the parties determine that the issue cannot be resolved, then the court will proceed with the hearing.
During the hearing, the court will permit oral argument from only the movant or a respondent that has filed opposition to the motion. A party has the option to not appear and instead rely on its papers, but the party must inform chambers.
What If Happens if No Objection to the Motion for Relief is Filed?
If the respondent does not file an objection, the motion will be decided on the papers. The movant is permitted to appear on an unopposed motion but is not required to do so.
What Happens after the Hearing Concludes?
After the hearing on the motion, the court will mail the parties a copy of the order that the judge signed.
The experienced attorneys at Scura Wigfield Heyer Stevens & Cammarota LLP can help you with your case. Contact our offices to schedule a free consultation.
