Cite as: Keith M. Lundin, Lundin On Chapter 13, § 124.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
Relief from the stay after confirmation is motion practice. The papers and procedures are the same as attend a motion for relief from the stay before confirmation.1 But the grounds for relief from the stay after confirmation are different from those applicable before confirmation,2 thus the evidence relevant to postconfirmation stay relief will be different.
Because of § 1327,3 a postconfirmation request for relief from the stay must focus on facts arising after confirmation of the plan.4 For example, default in payments is the most common cause for postconfirmation stay relief.5 The motion should allege that the movant is an allowed claim holder, should state the treatment provided in the confirmed plan and should specify how the debtor has failed to comply with the confirmed plan. A record from the Chapter 13 trustee showing the debtor’s default under the plan and an affidavit from the creditor that it has not received the payments due under the plan are useful exhibits to the stay relief motion. In jurisdictions that conduct full evidentiary hearings on motions for relief from the stay, the creditor must be prepared to prove the postconfirmation defaults with evidence from the debtor, the creditor or the Chapter 13 trustee.
The most efficient form of proof is usually evidence from the Chapter 13 trustee. In some jurisdictions, the trustee routinely appears at hearings on requests for relief from the stay and is available to provide evidence concerning the debtor’s payments into the plan and distributions to creditors. In other jurisdictions, the Chapter 13 trustee is not a party or is merely a nominal party to requests for relief from the stay and does not appear at the hearing unless the debtor or the creditor makes arrangements in advance.
There are obvious hearsay problems with proving the record of payments to and distributions by the Chapter 13 trustee absent an appearance by the trustee (or a custodian of the trustee’s records). Counsel has to know local practice and, absent a stipulation from the debtor, be prepared to present appropriate witnesses.
Discovery is difficult in any stay relief contest because of the short time between the filing and the required hearings under § 362 and Bankruptcy Rule 4001.6 A creditor needing discovery should file a motion to shorten the time for response to discovery along with the motion for relief from the stay.
Although not required by the Bankruptcy Rules,7 it is always advisable for debtors to respond in writing to a postconfirmation motion for relief from the stay. In some jurisdictions, a written response is required by local rule or order and the failure to respond in writing is deemed a statement of no opposition.
Because most postconfirmation requests for relief from the stay are prompted by defaults under the plan, the debtor’s response often includes a motion to modify the plan to cure the defaults.8 The debtor’s motion to modify may request a suspension of payments, may change the amount of payments to some or all creditors or may adjust the length of the plan to repair the default.
Because the request for relief from the stay must have at least a preliminary hearing within 30 days,9 the stay relief request may be set separately from any (responsive) motion to modify. Nonetheless, at the hearing on the request for relief from the stay, the debtor’s principal defense will be that the postconfirmation default can be cured through modification of the plan. Sometimes, the confusion of separately scheduled hearings is exactly what debtor’s counsel wants and what creditor’s counsel wants to avoid. Experienced counsel know to ask for consolidation of the hearings on the motion to modify and on the request for stay relief. If aware of the related matters, some courts will consolidate the hearings on the accelerated stay relief schedule.
Notice can be a real problem, especially if the debtor’s response to the stay relief request includes a motion to modify the plan. Notice of a postconfirmation request for relief from the stay is typically not served on anyone other than the debtor, the Chapter 13 trustee, the moving creditor and sometimes the U.S. trustee.10 Under Bankruptcy Rules 3015(g) and 2002(a)(6), all creditors are entitled to not less than 20 days’ notice by mail of the time fixed to accept or reject a proposed modification of a plan.11 Thus, the rules require broader notice of the debtor’s motion than of the original request for relief from the stay. It is difficult (or impossible) to give all creditors 20 days’ notice and schedule the hearing on the debtor’s modification of the plan within the original 30 days for the preliminary hearing on the creditor’s request for relief from the stay.
To get it all done within the 30 days in § 362(e), the 20-day notice requirement in Bankruptcy Rule 2002 can be reduced by the court.12 Otherwise, the first hearing on the request for relief from the stay becomes a preliminary hearing at which the debtor asserts the proposed modified plan as a defense and asks that a final hearing on stay relief be set to coincide with the hearing on the debtor’s motion to modify the plan. If the court requires the full 20-day notice period for modification of the plan, the final consolidated hearing will be 50 or 60 days after the original request for relief from the stay. This is a substantial period of time, particularly if the debtor is continuing to default under the plan.
The creditor’s best hope to manage this long delay is to move to consolidate and to reduce the Rule 2002(a) notice period as soon as the creditor is aware that the debtor has proposed a modification of the plan in response to the request for relief from the stay.
If no order is entered continuing the stay, the automatic stay of actions against property of the estate expires 30 days after filing the request for relief.13 When this happens, no order granting relief from the stay is actually entered by the court—stay relief is simply automatic under the statute. Creditors are not always comfortable proceeding against the debtor’s property without a court order. Creditor’s counsel can try submitting a proposed order memorializing the automatic relief described in § 362(e) of the Code. Once a postconfirmation order granting relief from the stay becomes final, it has been held that the stay cannot be reinstated, although there is nothing to prevent the creditor from agreeing to some accommodation with the debtor such as a forbearance agreement.14
1 See § 80.1 [ Timing, Procedure and Form ] § 63.2 Timing, Procedure and Form.
2 See discussion beginning at § 64.1 Lack of Adequate Protection.
3 See discussion beginning at § 120.1 11 U.S.C. § 1327: Overview.
4 See § 242.1 [ Confirmation as a Defense to Relief from the Stay ] § 124.2 Confirmation as a Defense to Relief from the Stay.
5 See § 244.1 [ Postconfirmation Default and Relief from the Stay ] § 124.4 Postconfirmation Default and Relief from the Stay.
6 See § 80.1 [ Timing, Procedure and Form ] § 63.2 Timing, Procedure and Form.
7 See Fed. R. Bankr. P. 9014 (“No response is required under this rule unless the court orders an answer to a motion.”).
8 See §§ 244.1 [ Postconfirmation Default and Relief from the Stay ] § 124.4 Postconfirmation Default and Relief from the Stay and 259.1 [ To Cure Postconfirmation Default ] § 127.2 To Cure Postconfirmation Default.
9 11 U.S.C. § 362(e). If the court holds a preliminary hearing on a request for relief from the stay, then a final hearing must be “concluded” not later than 30 days after the conclusion of the preliminary hearing unless the 30-day period is extended either with the consent of the parties or for a specific time required by compelling circumstances.
10 See Fed. R. Bankr. P. 4001.
11 See § 253.1 [ Standing, Timing and Procedure ] § 126.1 Standing, Timing and Procedure.
12 See Fed. R. Bankr. P. 9006.
13 11 U.S.C. § 362(e).
14 See In re Flores, 293 B.R. 251, 253 (Bankr. E.D. Cal. 2003) (Postconfirmation order granting stay relief became final and the stay cannot be reinstated by stipulation even with consent of the mortgage holder; “the parties are free to negotiate whatever out of court agreement they desire to avoid a foreclosure . . . . They do not need the automatic stay in place to enter into a private forbearance agreement.”).