How to vacate a bankruptcy stay?
This is our continuous addition to educate our readers who ask continuous questions about stay in bankruptcy. It is a short article, and cannot provide all the information but we are willing to answer more questions, if someone like to (again only in the educational context) send us the email to Malik@lasvegaslawgroup.com. Under Section 362(d), the court, on request of a party in interest, may grant relief from the automatic stay by “terminating, annulling, modifying, or conditioning such stay:
1. for cause, including the lack of adequate protection of an interest in property of such party in interest; or
2. If (a) the debtor does not have an equity in such property, and (b) such property is not necessary to an effective reorganization.
Courts have vacated or annulled the automatic stay on a finding that the bankruptcy case was not commenced with good faith (In re Dimitri, 111 Fed. Appx. 756,757 (5th Cir. 2004) However, bad faith standards are very tough to prove that requires careful examination of the facts on a case-by-case basis. However, following is a short list of bad faith grounds.
1. Debtor previous filing of bankruptcy.
2. Debtor’s collusion with the petitioning creditor.
3. An automatic stay may be terminated for “cause” pursuant to section 362(d)(1) of the Bankruptcy Code. A decision to lift the stay is discretionary with the bankruptcy judge and may be reversed only upon a showing of abuses of discretion. The decision on whether or not to grant or deny relief from an automatic stay may be analogize to a decision whether or not to grant preliminary injunctive relief. The fact the preliminary relief is obtained does not mean that permanent relief also must be forthcoming.
How to Annul the Stay?
Acts in violation of the automatic statutory are generally deemed void and without effect. Again, Section 362(d) grants bankruptcy courts the option of “annulling” the automatic stay to grant retroactive relief, validating actions taken by a party at a time when he may have been unaware of the existence of the stay, in addition to merely “terminating” it.
The bankruptcy courts have inherent authority to assess attorneys’ fees and expenses against those who willfully abuse the judicial process by filing in bad faith.