Challenging the Automatic Stay: What Happens Next

If a creditor challenges the automatic stay in a Chapter 11 bankruptcy case, several steps and considerations come into play:

1. Filing a Motion: The creditor must file a motion with the bankruptcy court to lift the automatic stay, providing detailed reasons and supporting documentation for why the stay should be lifted. 12
2. Grounds for Lifting: The court will consider whether there is "cause" to lift the stay, which can include situations where the debtor has no equity in the property and the property is not necessary for an effective reorganization. 35
3. Hearing and Response: The court will schedule a hearing to consider the motion and any objections raised by the debtor. The debtor has a limited time (typically 14 days) to respond to the motion. 6
4. Court Decision: The court will decide whether to grant the motion and lift the stay. If the court grants the motion, the creditor can resume collection activities against the debtor. 16
5. Consequences: If the stay is lifted, the debtor loses the protection against creditor actions, and the creditor can proceed with foreclosure, repossession, or other collection activities. 6

Key Considerations

• Equity and Reorganization: The court will assess whether the debtor has equity in the property and whether the property is essential for a successful reorganization. 35
• Adequate Protection: The court may lift the stay if the creditor's interest in the property is not adequately protected, such as when the property's value is decreasing. 45
• Prior Bankruptcy Filings: If the debtor has filed multiple bankruptcy cases within a short period, the court may be more inclined to lift the stay due to potential abuse of the bankruptcy process. 46