§ 64.5     Application of § 362(d)(2) in Chapter 13 Cases
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 64.5, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Relief from the stay is appropriate under § 362(d)(2) with respect to property if the debtor is without equity and “such property is not necessary to an effective reorganization.”1 The phrase “effective reorganization” in § 362(d)(2)(B) has led some courts to hold that § 362(d)(2) is not applicable in Chapter 13 cases because Chapter 13 deals with the “adjustment” of debts of an individual with regular income, and “reorganization” is a term of art only in Chapter 11 cases.2 The majority of courts have held that § 362(d)(2) is applicable in Chapter 13 cases.3 There is reasonable statutory construction to support the majority view. 11 U.S.C. § 103(a) states that Chapter 3 of Title 11 applies in a case under Chapter 13. Elsewhere in the Code, when Congress intended that a particular section of Chapter 3 not apply to cases under a specific chapter, Congress said so with precise cross-references.4 There is no provision of the Code excluding § 362(d)(2) from application in Chapter 13 cases.

[2]

The word reorganization is not a defined term under the Bankruptcy Code, although it appears as the title to Chapter 11. The legislative history of § 362(d)(2) indicates that Congress was concerned about business reorganizations and, in particular, single-asset-business reorganizations in which the debtor was without equity.5 The legislative history of other sections of the Code suggests that Congress sometimes conceived of reorganization as a term of art distinct from a Chapter 13 case.6 This ambiguous use of words in legislative history should not trump the plain language of 11 U.S.C. § 103(a).

[3]

When relief from the stay is requested under § 362(d)(2), 11 U.S.C. § 362(g) assigns the burden of proof to the creditor on the issue of equity, and the debtor bears the burden of proving that the property is necessary to an effective reorganization.7 A lienholder is not entitled to relief from the stay when it fails to prove that the debtor is without equity under § 362(d)(2)(A).8 A lienholder is entitled to relief from the stay when it alleges that its collateral is not necessary to the debtor’s reorganization and the debtor fails to contest the issue.9

[4]

Because equity in property is relatively uncommon in Chapter 13 cases, the § 362(d)(2) calculus most often turns on necessity to an effective reorganization. It has been held that a car is necessary to an effective reorganization when it is the debtor’s only means of transportation10 and when the debtor proves that the vehicle is used in a business activity.11 When the debtor is without equity in a car and the car is being used by the debtor’s child, it has been held that the car is not necessary to the debtor’s reorganization and relief is warranted under § 362(d)(2).12 Relief from the stay under § 362(d)(2) was granted to a former spouse with a lien on the debtor’s inheritance in an amount that was greater than the inheritance when the debtor presented no evidence that the inheritance was necessary to an effective reorganization or that an effective reorganization was possible.13 When the debtors do not allege that real estate is necessary to their Chapter 13 case, § 362(d)(2) applies, and relief is warranted upon the creditor’s showing that the debtors have no equity in the property.14 Once the mortgage holder demonstrates there is no equity in the debtor’s home, if the debtor produces no evidence of the necessity of the home to an effective reorganization, the mortgage holder is entitled to relief from the stay.15

[5]

In Chapter 13 cases, necessity to an effective reorganization includes consideration of the possibility or probability that the debtor can propose and confirm a plan that includes the creditor’s collateral.16 For example, notwithstanding the absence of equity in a car, it has been held that a lienholder is not entitled to relief from the stay under § 362(d)(2) when the debtor “has the ability of proposing a plan which can fully pay [the] secured claim . . . . [W]hile the debtor cannot be compelled to do so, he certainly has the ability. He should have the opportunity to take advantage of it.”17 Similarly, notwithstanding the absence of equity in the debtor’s home, it has been held that the mortgage holder is not entitled to relief from the stay when the debtor “may be able” to propose a plan that cures the mortgage arrearages and maintains the regular monthly payment until the secured portion of the mortgage is paid in full.18

[6]

But evidence that the debtor has the ability to pay a lienholder’s claim is not alone sufficient to prove necessity to an effective reorganization. Although one court has overstated that “the Debtors’ ability to make their proposed payments is not relevant to the Court’s inquiry under § 362(d)(2),”19 ability to pay bears on necessity to an effective reorganization only in the negative sense that inability to pay a lienholder’s claim or inability to propose a plan with a reasonable prospect of confirmation is proof of the absence of an effective reorganization that includes the lienholder’s collateral. Ability to pay a lienholder’s claim may be a condition that the debtor must prove to bear the debtor’s burden under § 362(d)(2); it cannot be sufficient evidence by itself of necessity to an effective reorganization. To hold otherwise would open the door to debtors keeping luxury items and excessively expensive homes and cars that would drain all meaning from “necessary” in § 362(d)(2)(B).

[7]

Proof that a particular home or item of property is necessary to an effective reorganization can be difficult in a Chapter 13 case. “Necessary” and “effective reorganization” are not defined by the Code. One court observed that determining whether property is necessary to an effective reorganization in a Chapter 13 case “inherently involves an intense factual analysis, requiring evidence as to the debtor’s intent, the anticipated integration of the property at issue in the production of future income and the nature and extent of the property involved.”20Another court employed the especially strict notion that property is not necessary unless it “will generate income or increase the value of the business and thereby benefit the estate.”21 By this definition, a debtor’s home would rarely be necessary to an effective reorganization unless it is also income producing. Evidence that property produces income that will fund the plan is persuasive evidence that the property is necessary to an effective reorganization.22

[8]

It can almost always be argued that alternative housing is available to the debtor, and it may even be true that comparable housing is available at less cost. There are cases holding that a debtor’s home is not necessary to an effective reorganization unless the debtor can prove that the home is unique or not readily fungible with other living arrangements.23 In contrast, there are cases holding there is an “irrebutable presumption” that a Chapter 13 debtor’s home is necessary to an effective reorganization or it is “self-evident” that the family residence is necessary to an effective reorganization in a Chapter 13 case.24 Other courts have struggled mightily to determine whether the availability of substitute housing renders the debtor’s home unnecessary for an effective Chapter 13 reorganization.25

[9]

To show the necessity of the family residence, debtor’s counsel may need to prove proximity to schools, work, recreation, church and so forth. The cost of comparable housing and moving and the difficulty of getting a new mortgage would be relevant. The debtor should present a plan that adequately protects the creditor and provides for payment of the secured claim.26 Creditor’s counsel might respond with evidence that comparable housing is readily available, that less expensive housing is available, that a shift from owning to renting would benefit creditors and the like.

[10]

Rental property presents special problems with respect to relief from the stay under § 362(d)(2). It is common for Chapter 13 debtors to be tenants rather than owners of residential property. It is also common for debtors to be behind in rent at the petition. The residential rental contract is property of the Chapter 13 estate,27 and the debtor can assume, assign or reject that contract under § 365 of the Bankruptcy Code as part of a plan or by motion in advance of confirmation.28 If the debtor is in default of a residential lease at the petition, and especially if the debtor accumulates additional defaults by not paying rent after the filing, the landlord may include § 362(d)(2) as a ground for relief from the stay to dispossess the debtor.29

[11]

The landlord’s request for relief from the stay can be combined with a motion under Bankruptcy Rule 6006(b) and § 365(d)(2) to require the debtor to assume or reject the lease in advance of confirmation.30 Combining the stay relief request and the motion under Bankruptcy Rule 6006(b) sometimes works to the landlord’s advantage because the stay relief request must be set for hearing within 30 days of filing.31

[12]

At the hearing on relief from the stay under § 362(d)(2) with respect to a residential lease, the lessor will have an easy burden to prove lack of equity in the lease. The debtor may have a more difficult time proving the necessity of the lease to an effective reorganization. The debtor may be forced to respond with a motion to assume the lease. The debtor will then have to prove that this particular lease is necessary to the debtor’s reorganization under Chapter 13. The availability of alternative rental housing may make it difficult to prove the necessity of this particular lease. The debtor might prove that the expense or disruption of moving will hamper the effort to confirm and consummate a plan. If the debtor’s lease is government subsidized, the debtor might prove that the subsidy is income that is necessary to the success of the plan.32 If the debtor’s rent is higher than the rent for alternative accommodations, the landlord may be entitled to stay relief even though the debtor proposes to assume the lease.

[13]

“Luxury goods” are an area in which § 362(d)(2) is especially useful to creditors. If the debtor has acquired sophisticated electronic equipment, several expensive televisions,33 more than one car in a family where only one person works, expensive recreational equipment or the like, the luxury items are not necessary to the debtor’s reorganization and lienholders should be granted relief from the stay.34 The creditor’s argument for stay relief under § 362(d)(2) is well taken if the expense of the luxury item would not be allowed as a reasonable and necessary expense for purposes of the disposable income test at confirmation under § 1325(b)(1).35


 

1  11 U.S.C. § 362(d)(2).

 

2  Lomas Mortgage USA v. Fischer (In re Fischer), 136 B.R. 819, 825 (D. Alaska 1992) (When the Ninth Circuit addresses the question, it will agree with In re Rhoades, 34 B.R. 164 (Bankr. D. Vt. 1983), and hold that § 362(d)(2) does not apply to Chapter 13 cases. “It would defeat the purpose of Chapter 13 in many instances if this section was found to apply. A Chapter 13 proceeding is not a reorganization of a business entity and therefore should not require the same standards as a Chapter 11 reorganization . . . . In the alternative, . . . the property in question is necessary . . . [because it] provides a positive cash flow which is being applied to the plan.”); Citizens & S. Nat’l Bank v. Feimster, 3 B.R. 11 (Bankr. N.D. Ga. 1979).

 

3  See In re Walters, 188 B.R. 582, 585 (Bankr. E.D. Ark. 1995) (Section 362(d)(2) “is clearly incorporated for use within Chapter 13 cases pursuant to 11 U.S.C. § 103(a). . . . If Congress had intended for subsection 362(d)(2) to be excluded from the referral of 11 U.S.C. § 103(a), then Congress would have so stated.”). Accord In re Siciliano, 167 B.R. 999 (Bankr. E.D. Pa. 1994); In re Scott, 121 B.R. 605 (Bankr. E.D. Okla. 1990); In re Kessler, 86 B.R. 134 (Bankr. C.D. Ill. 1988); In re Brown, 70 B.R. 10 (Bankr. S.D. Ohio 1986); In re Ashton, 63 B.R. 244 (Bankr. D.N.D. 1986); Mills v. Gellert, 55 B.R. 970 (Bankr. D.N.H. 1985); In re Klutzaritz, 46 B.R. 368 (Bankr. E.D. Pa. 1985).

 

4  See, e.g., 11 U.S.C. § 1161 (“§§ 341, 343 . . . of this title do not apply in a case concerning a railroad.”); 11 U.S.C. § 901(a) (“[§ ] . . . 362 . . . [applies] in a case under this chapter.”).

 

5  See S. Rep. No. 95-989, at 52 (1978). This concern for relief from the stay in single-asset reorganizations led Congress to amend § 362(d) in 1994 to add a special provision for relief from the stay in cases involving “single asset real estate.” 11 U.S.C. § 362(d)(3), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 218, 108 Stat. 4106 (1994), provides that the court shall grant relief from the stay

with respect to a stay of an act against single asset real estate . . . unless, not later than the date that is 90 days after the entry of the order for relief (or such later date as the court may determine for cause by order entered within that 90-day period)—
(A) the debtor has filed a plan of reorganization that has a reasonable possibility of being confirmed within a reasonable time; or
(B) the debtor has commenced monthly payments to each creditor whose claim is secured by such real estate . . . in an amount equal to interest at a current fair market rate on the value of the creditor’s interest in the real estate.

    The use of the phrase “plan of reorganization” in § 362(d)(3), as amended, raises the same question discussed in the text with respect to § 362(d)(2)—did Congress use reorganization to exclude adjustments of debts of an individual with regular income under Chapter 13 of the Code? Single asset real estate as defined in 11 U.S.C. § 101(51B) could be present in a Chapter 13 case. See § 79.1 [ Strategic Considerations ] § 63.1  Strategic Considerations. See, e.g., In re Syed, 238 B.R. 126 (Bankr. N.D. Ill.) (Cause for annulment of automatic stay to validate postpetition foreclosure sale that debtor caused wholly owned corporation to deed single asset real estate to herself to stop foreclosure sale and debtor was without prospects of rehabilitation.”), on reconsideration, 238 B.R. 133, 139–40 (Bankr. N.D. Ill. 1999) (“The stay was not annulled here merely because Debtor filed a single asset real estate case. Rather, it was annulled primarily because it was found that Debtor had not (as required by section 362(d)(3)) filed a plan of reorganization with a reasonable possibility of being confirmed within a reasonable time.”).

 

6  See, e.g., H.R. Rep. No. 95-595, at 383 (1977); S. Rep. No. 95-989, at 97 (1978) (discussing the priority of distribution for administrative expenses after conversion to Chapter 7 under 11 U.S.C. § 726: “reorganization administrative expenses . . . from a reorganization case . . . or from an individual repayment plan case . . . .”); H.R. Rep. No. 95-595, at 405–06 (1977); S. Rep. No. 95-989, at 117–18 (1978) (Discussing conversion from Chapter 11 to other chapters: “[1112(d)] prohibits conversion of a reorganization case to a Chapter 13 case unless . . . .”).

 

7  See also § 81.1 [ Lack of Adequate Protection ] § 64.1  Lack of Adequate Protection.

 

8  In re Harrington, 282 B.R. 637 (Bankr. S.D. Ohio 2002) (Bank failed to carry its burden of proof under § 362(d)(2) that the debtor lacked equity in Kenworth tractor.); In re Howery, 275 B.R. 852, 854 (Bankr. S.D. Ohio 2002) (Motion for relief from the stay under § 362(d)(2) fails because “Provident Bank has the burden of proof on the issue of the debtor’s equity in the property. . . . [I]t did not present any evidence during its case-in-chief . . . that the debtor lacked equity in the property.”); In re Crowley, 258 B.R. 587, 592 (Bankr. D. Vt. 2000) (Mortgage holder’s postconfirmation motion for relief from the stay based in part on § 362(d)(2) is rejected: “the Movants are adequately protected by the undisputed equity in the subject property. . . . [T]he subject property is necessary to the debtor’s effective reorganization.”); In re Rogers, 239 B.R. 883, 885 (Bankr. E.D. Tex. 1999) (Undersecured car lender “failed to establish a prima facie case for relief under § 362(d)(2) because the Bank failed to present any evidence regarding the Debtor’s lack of equity in the subject vehicle.”); In re Dandridge, 221 B.R. 741, 747 (Bankr. W.D. Tenn. 1998) (“Debtor has equity in her property; thus PFC cannot prevail under Section 362(d)(2).”); In re Parks, 193 B.R. 361, 366 (Bankr. N.D. Ala. 1995) (Stay relief is not appropriate under § 362(d)(2) where there is equity in the debtors’ homestead and the debtors propose to cure defaults within a reasonable time under § 1322(b)(5). “There is equity in this property and the property is necessary for an effective reorganization.”); In re Siciliano, 167 B.R. 999 (Bankr. E.D. Pa. 1994) (Mortgage holder is not entitled to relief from the stay because it failed to meet its burden of proving that the debtor did not have equity under § 362(d)(2)(A).); In re Novak, 121 B.R. 18 (Bankr. W.D. Mo. 1990) (When there is overwhelming value in an asset, bankruptcy court will be extremely reluctant to lift the stay to allow foreclosure. Debtor purchased 7,000-square-foot house for $248,000 in 1993. Debtor currently owes $114,000. Creditor is adequately protected.); In re Heath, 79 B.R. 616 (Bankr. E.D. Pa. 1987) (Relief from stay was denied, notwithstanding debtor’s failure to make postpetition mortgage payments for 22 months, when mortgage holder had 39% equity cushion.).

 

9  See, e.g., In re Zeoli, 249 B.R. 61, 64 (Bankr. S.D.N.Y. 2000) (Undersecured car lender is entitled to relief from the stay under § 362(d)(2) because the debtors do not have equity and the debtors “have not contested the Bank’s assertion that the vehicle ‘is not necessary to an effective reorganization’ . . . in their papers in opposition.”).

 

10  In re Huffman, No. 5:01-BK-51707E, 2002 WL 32116805 (Bankr. E.D. Ark. June 20, 2002) (unpublished) (Judicial lienholder is not entitled to relief from the stay under § 362(d)(2) because pickup was necessary to get the debtor to and from work.); In re Kowalsky, 235 B.R. 590, 595 (Bankr. E.D. Tex. 1999) (Car is necessary to an effective reorganization because it is the debtor’s only means of transportation. “[T]he Debtors have established that the vehicle is their only reliable form of transportation and the Court finds that this vehicle is necessary for an effective reorganization which precludes the granting of stay relief under § 362(d)(2).”); American Honda Fin. Corp. v. Littleton (In re Littleton), 220 B.R. 710, 712 (Bankr. M.D. Ga. 1998) (Car repossessed the day before petition is necessary for a successful reorganization because one debtor works in Michigan while other is seeking employment in Georgia, and “both debtors will each need a vehicle to maintain their employment.”); In re Sharon, 200 B.R. 181, 194 (Bankr. S.D. Ohio 1996) (A 1995 Mitsubishi 3000GT automobile was necessary to an effective reorganization. “TranSouth’s interest in the Vehicle is adequately protected by the proposed plan payments. . . . The Debtor is current on her monthly payments and has maintained insurance on the Vehicle since the inception of this case.” The car was “the Debtor’s only means of transportation to and from her employment. . . . TranSouth offered no evidence to establish or suggest that the Vehicle is ‘a luxury vehicle beyond the contemplation of the Code.’”), aff’d on other grounds, 234 B.R. 676 (B.A.P. 6th Cir. 1999).

 

11  In re Williams, 299 B.R. 684, 685 (Bankr. S.D. Ga. 2003) (Lessor of truck cannot prove entitlement to relief from the stay under § 362(d)(2): “[b]ecause Debtor uses the truck in his employment, it is necessary to an effective reorganization.”); In re Self, 239 B.R. 877, 879 (Bankr. E.D. Tex. 1999) (With respect to pick-up, debtor carries burden of proof under § 362(d)(2) “by presenting uncontradicted testimony that the Collateral is used in his day-to-day business activities and is essential to the continuation of such activities upon which the viability of the proposed plan rests.”).

 

12  In re Brown, 70 B.R. 10 (Bankr. S.D. Ohio 1986).

 

13  In re Ennis, 178 B.R. 177 (Bankr. W.D. Mo. 1995).

 

14  In re Klutzaritz, 46 B.R. 368 (Bankr. E.D. Pa. 1985). Accord In re Zeoli, 249 B.R. 61 (Bankr. S.D.N.Y. 2000) (When undersecured car lender proved that debtors did not have equity in the car, lender was entitled to relief from the stay because the debtors failed to contest the bank’s assertion that the car was not necessary to an effective reorganization.).

 

15  Finizie v. Bridgeport (In re Finizie), 184 B.R. 415, 421 (Bankr. D. Conn. 1995) (Relief was granted under § 362(d)(2) because the maximum fair market value of the debtor’s property was $75,000, the claim of the city for delinquent property taxes was not less than $222,623.73, and “there has been no evidence whatsoever that there can be ‘a reasonable possibility of a successful reorganization within a reasonable time.’”); In re Eynetich, 98 B.R. 966 (Bankr. D. Neb. 1988).

 

16  See United Sav. Ass’n of Tex. v. Timbers of Inwood Forest Assocs., 484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988). See, e.g., In re Burton, 195 B.R. 588, 592 (Bankr. W.D.N.Y. 1996) (Mortgage company entitled to emergency stay relief under § 362(d)(2) where debtor defaulted in payments on a confirmed plan, filed a second Chapter 13 case to fix the default while the first case was still pending, there was no equity in the property, and debtor failed to prove sufficient income to confirm a plan. “[T]he Debtor did not demonstrate with reasonable certainty that there was a reasonable prospect for reorganization under Chapter 13, even if the second filing were permitted.”).

 

17  In re Jones, 119 B.R. 996, 1006 (Bankr. N.D. Ind. 1990). See also In re Sharon, 200 B.R. 181, 194 (Bankr. S.D. Ohio 1996) (A 1995 Mitsubishi 3000GT automobile was necessary to an effective reorganization. “TranSouth’s interest in the Vehicle is adequately protected by the proposed plan payments. . . . The Debtor is current on her monthly payments and has maintained insurance on the Vehicle since the inception of this case.” The car was “the Debtor’s only means of transportation to and from her employment. . . . TranSouth offered no evidence to establish or suggest that the Vehicle is ‘a luxury vehicle beyond the contemplation of the Code.’”), aff’d on other grounds, 234 B.R. 676 (B.A.P. 6th Cir. 1999).

 

18  In re Honett, 116 B.R. 495 (Bankr. E.D. Tex. 1990). Accord First Nat’l Bank v. Sidelinger (In re Sidelinger), 175 B.R. 115 (Bankr. D. Me. 1994) (Debtor proved necessity to an effective reorganization with respect to home mortgage by proving that a 36-month curing of default was reasonable and probable and by showing income sufficient to fund the proposed plan. Court conditioned stay that the debtor make payments to the mortgage holder and to the Chapter 13 trustee pending confirmation.).

 

19  In re White, 216 B.R. 232, 236 (Bankr. S.D. Ohio 1997).

 

20  In re Scott, 121 B.R. 605, 608 (Bankr. E.D. Okla. 1990).

 

21  In re Kessler, 86 B.R. 134 (Bankr. C.D. Ill. 1988). Accord In re Walters, 188 B.R. 582, 585–86 (Bankr. E.D. Ark. 1995) (Boat, motors, and trailer are not necessary to an effective reorganization in a sign painter’s Chapter 13 case; lender is entitled to relief from the stay notwithstanding that plan proposes to pay all creditors in full. “‘[A]n effective reorganization means a probability that the Chapter 13 Plan as proposed can be funded in a way which will cure the arrearages.’ . . . Here, the boat is not funding Walters’ Chapter 13 plan. Therefore the boat, motors, and trailer are not contributing to the probability that the Chapter 13 plan will be funded. . . . [T]he boat, motors, and trailer are not necessary for the effective reorganization of Walters.”).

 

22  See Lomas Mortgage USA v. Fischer (In re Fischer), 136 B.R. 819, 825 (D. Alaska 1992) (In an alternative holding, the court observes, “[T]he property in question is necessary . . . [because it] provides a positive cash flow which is being applied to the Plan.”).

 

23  See In re Lippolis, 228 B.R. 106, 113 (E.D. Pa. 1998) (Questioning In re Crompton, 73 B.R. 800 (Bankr. E.D. Pa. 1987), in dicta, necessity to an effective reorganization with respect to a Chapter 13 debtor’s house requires case-by-case examination of the debtor’s motives and the availability of comparable housing. “While Crompton supports Debtors’ contention, later cases from this district have held that a better approach is ‘close examination of debtor’s motive testimony’ to get to ‘the heart of the term necessary.’ . . . Normally, this entails the presentation of evidence that retention of the home is necessary for reorganization because no comparable housing is available or because the home is necessary to the debtor’s business.”); In re Williams, 257 B.R. 297, 303 (Bankr. W.D. Mo. 2001) (One reason for annulling the stay to validate a postpetition foreclosure sale is the absence of equity and that the property is not necessary to an effective reorganization under § 362(d)(2). To cure arrearages and maintain payment on the residential mortgage, the debtor would be required to pay between $1,200 and $1,400 per month to the mortgage holder. “The Debtor, a single man, could rent adequate housing for less than half what he would be required to pay Atlantic, and that would give him a much better chance of successfully completing his Plan.”); In re McPherson, 225 B.R. 203, 205 (Bankr. D. Idaho 1998) (Second mortgage holder is entitled to relief under § 362(d)(2) because debtor does not have equity, and monthly burden to save house is between $1,300 and $1,400, fully half of debtor’s monthly pretax income. “While living accommodations are necessary, nothing is unique about this property or Debtor’s interest in it which would indicate that such a significant portion of the Debtor’s future income should or need go to payment of these obligations as opposed to payment for alternative housing.”); In re Binder, 224 B.R. 483, 490 (Bankr. D. Colo. 1998) (On postconfirmation motion for relief from the stay based on default in postpetition mortgage payments, home is not necessary to performance under Chapter 13 plan because debtor has no equity, debtor presented no evidence that “the Debtor cannot obtain rental housing at a cost equal to or less than her current payments,” and debtor lacks financial ability to cure postpetition defaults in a reasonable time through modification of the plan.); In re White, 216 B.R. 232, 236 (Bankr. S.D. Ohio 1997) (“A debtor’s home is necessary to an effective reorganization only if the property is not fungible with other living arrangements meeting the debtor’s minimum living arrangements. . . . The creditor has the burden of proof on the issue of equity; the debtor has the burden of proof on all other issues. . . . The Debtors contend that the residence is close to Mr. White’s place of business, where he works irregular hours, and that they have added improvements to the house in the form of a finished basement and landscaping. The Debtors presented no evidence that alternative housing was unavailable. The Debtors’ residence, valued at $450,000.00, with or without a finished basement and new landscaping, far exceeds a minimum living requirement. . . . [T]he Debtors’ ability to make their proposed payments is not relevant to the Court’s inquiry under § 362(d)(2). . . . [T]he Debtors’ proposed plan . . . would allow them to retain a very expensive home . . . yet pay their unsecured creditors only 25%. . . . [T]he Debtors have failed to meet their burden of showing that the Quarterhorse property is necessary to an effective reorganization.”).

 

24  See Grundy Nat’l Bank v. Stiltner, 58 B.R. 593 (W.D. Va. 1986); In re Garner, 18 B.R. 369 (S.D.N.Y. 1982); In re Donahue, 221 B.R. 105, 112–13 (Bankr. D. Vt. 1998) (“[T]here is an irrebuttable presumption that a chapter 13 debtor’s home is necessary for an effective reorganization.”), rev’d on other grounds, 232 B.R. 610, 615 (D. Vt. 1999) (Confirmation and denial of relief from the stay was “predicated on a clearly erroneous factual finding” that the lot and mobile home to be retained by the debtor was the debtor’s principal residence and necessary to an effective reorganization. “No evidence was introduced at the hearing regarding the primary residence issue. Rather, Judge Conrad relied upon arguments of counsel. On several occasions . . . Donahue’s attorney admitted that Donahue was living at his brother’s house—that he wanted to make the property his principal residence. . . . It is unclear to the Court whether Donahue’s mobile home constituted his primary residence. On remand, a full evidentiary hearing should be conducted to address this issue.”); In re Parks, 193 B.R. 361, 366 (Bankr. N.D. Ala. 1995) (“Nothing could be more related to an effective reorganization than the ability to keep and pay for their house.”); Central Bank v. Thomas (In re Thomas), 121 B.R. 94, 108 (Bankr. N.D. Ala. 1990) (“[A] stable residence, particularly one in which the debtor and her two children have lived for a number of years, must be considered essential to a successful reorganization under Chapter 13.”); In re Johnson, 45 B.R. 618 (Bankr. D. Md. 1985); Citicorp Homeowners, Inc. v. Willey, 24 B.R. 369 (Bankr. E.D. Mich. 1982); GMAC v. Miller, 13 B.R. 110 (Bankr. S.D. Ind. 1981).

 

25  See Kehm v. Citicorp Homeowners Serv., Inc. (In re Kehm), 90 B.R. 117, 122–23 (Bankr. E.D. Pa. 1988) (Section 362(d)(2) applies in Chapter 13 cases. “Inconsistent opinions exist within our district on the question of whether the non-availability of comparable housing makes . . . residential property necessary for an effective [C]hapter 13 reorganization. . . . A broader and more appropriate statement of the law regarding homes as ‘necessary’ property lies somewhere between the positions represented by [Pennsylvania v. Gardner (In re Gardner), 14 B.R. 455 (Bankr. E.D. Pa. 1981) (‘The availability of cheaper housing precludes this property from being necessary for Chapter 13 reorganization’)] and [In re Crompton, 73 B.R. 800 (Bankr. E.D. Pa. 1987)]. . . . We think that the appropriate approach to these cases is one . . . which eschews a rigid per se rule in favor of a close examination of debtor’s testimony.” Debtors that have $479 per month available for housing can rent a comparable home, and their home is not necessary within the meaning of § 362(d)(2).); In re Crompton, 73 B.R. 800 (Bankr. E.D. Pa. 1987) (Section 362(d)(2) probably applies in Chapter 13 cases and requires a reasonable probability that the debtor will be able to propose a plan for a successful reorganization within a reasonable time. That the debtor might obtain comparable housing more cheaply elsewhere is not appropriate reasoning in a Chapter 13 case. Home ownership is a significant human value.); In re Klutzaritz, 46 B.R. 368 (Bankr. E.D. Pa. 1985) (Section 362(d)(2) does apply in Chapter 13 cases. Relief from stay is granted when debtors have no equity and have not alleged that the real estate is necessary to reorganization.).

 

26  See In re Parks, 193 B.R. 361, 366 (Bankr. N.D. Ala. 1995) (Stay relief is not appropriate under § 362(d)(2) where there is equity in the debtors’ homestead and the debtors propose to cure defaults within a reasonable time under § 1322(b)(5). “There is equity in this property and the property is necessary for an effective reorganization.”); In re Jones, 119 B.R. 996 (Bankr. N.D. Ind. 1990) (Ability of debtor to propose a plan that could be confirmed that would satisfy the moving creditor’s rights in the Chapter 13 case is sufficient to defeat request for relief from the stay.); In re Honett, 116 B.R. 495 (Bankr. E.D. Tex. 1990) (The possibility that debtor can bifurcate home mortgage into secured and unsecured portions and retire the secured portion through the plan is sufficient to defeat relief from the stay.).

 

27  11 U.S.C. § 541.

 

28  See § 51.3  Assume, Reject or Assign Leases, Rental Agreements and Executory Contracts and § 102.1  Debtor Can Assume, Assign or Reject Executory Contracts.

 

29  The nonpayment of rent after the petition might also be “cause” for relief from the stay under § 362(d)(1).

 

30  See § 174.4 [ Lessor Can Accelerate Assumption or Rejection ] § 102.7  Lessor Can Accelerate Assumption or Rejection.

 

31  See 11 U.S.C. § 362(e). The final hearing on relief from the stay must be concluded not later than 30 days after the conclusion of any preliminary hearing, unless that 30-day period is extended with the consent of the parties or the court finds that an extension is required by compelling circumstances. 11 U.S.C. § 362(e).

 

32  See In re Cottle, 189 B.R. 591 (Bankr. E.D. Pa. 1995) (Public housing lease is necessary to an effective reorganization. Debtor’s promise to pay future utility bills from utility allowance was sufficient assurance of future performance to defeat preconfirmation relief from the stay.).

 

33  But see In re Shelby, 127 B.R. 682, 695 (Bankr. N.D. Ala. 1991) (For a family with limited financial means and two infant children, one television set is necessary to an effective reorganization. “In the context of late 20th century American society in general and of the particular needs of this young couple, . . . the television is necessary to the . . . effective reorganization.”).

 

34  See In re Clark, No. 4:02-BK-10963E, 2002 WL 32114480, at *1 (Bankr. E.D. Ark. Sept. 3, 2002) (unpublished) (Motor coach is not necessary to reorganization for § 362(d)(2) purposes because “the Debtor has not used the vehicle in 20 months and has only speculative plans for its future use.”); In re Walters, 188 B.R. 582 (Bankr. E.D. Ark. 1995) (Boat, motors, and trailer are not necessary to an effective reorganization in a sign painter’s Chapter 13 case; lender is entitled to relief from the stay notwithstanding that plan proposes to pay all creditors in full.).

 

35  See § 165.1 [ Reasonably Necessary for Maintenance or Support ] § 91.3  Reasonably Necessary for Maintenance or Support.