• Relief From Stay Hearing Preparation
Our division strictly adheres to Local Bankruptcy Rule 4001-1 in conducting relief from stay hearings. Click here for more information on Local Bankruptcy Rule 4001-1. You should tailor your presentation to the requirements of this rule.

Common Mistakes/Misconceptions:

1. For Debtors without attorneys: There will likely not be a hearing on the motion if you have not filed a response to the motion. The notice sent to you with the motion requires you to file and serve on the opposing party a written response within seven days before the hearing, which usually translates into one calendar week prior to the hearing, absent holidays and other unusual circumstances. Thus, in the typical case, if the hearing is set on a Thursday, your written response must be received by the court and mailed or hand-delivered to the opposing party by the Thursday before the hearing. If you fail to file a response, the moving party will request an order granting it relief and it will likely enter. The Order itself is primarily a ministerial act. Section 362(e) of the Bankruptcy Code provides that, unless the bankruptcy court orders that the stay be continued in effect, the automatic stay (which keeps the creditor from such actions as foreclosing or repossessing) is terminated within thirty days from the date of the motion, by operation of law. This means that the filing of the motion and the passage of time alone are sufficient to cause relief from the stay to occur, unless the debtor or trustee timely requests a hearing, the hearing is held, and the court enters an order denying the motion or continuing it for a further hearing.

2. Failure to exchange exhibits and witness lists with opposing party/counsel prior to the hearing. Don’t forget that some attorneys participate in the hearing by telephone and you cannot count on being able to make the exchange in person.

3. The hearing will be conducted as a “preliminary hearing” only if “there is a reasonable likelihood that the party opposing relief from such stay will prevail at the conclusion of such final hearing.” 11 U.S.C. § 362(e). Our Local Rule 4001-1 contemplates the use of detailed offers of proof and no live witnesses. But this does not mean that we will not dispose of most stay motions at the initial hearing. If the offers demonstrate a genuine issue of material fact, such that if the party opposing relief prevailed on the factual issue, it would cause that party to defeat the motion, then we would set the matter for a final evidentiary hearing and treat the initial hearing as a preliminary hearing. Don’t assume that you can make general statements of what you hope you can prove by the time of a final hearing, or else you may lose at the initial hearing!

4. Failure to identify any expert witnesses, and to tender a list of the expert’s qualifications and a written summary of the expert’s expected testimony and opinions.

5. To see how this Court views the movant’s burden of proof in a relief from stay hearing, see In re Anthem Communities/RBG, LLC, 267 B.R. 867 (Bankr. D. Colo. 2001). Don’t forget to make a motion for a directed verdict if you think a party has not satisfied its burden.

6. Remember that relief from stay proceedings are “summary proceedings” in nature. While you need to present detailed offers of proof, keep in mind that the court will not “finally determine” any of the factual issues raised. It will only make summary determinations as to whether the statutory grounds for relief have been satisfied.

Example: A creditor files a motion seeking relief to repossess widgets that it sold to the debtor. The basis for the seller’s lien rights is not a UCC filing, but the assertion of a statutory lien right arising under another state’s statute. The trustee claims that this statute does not apply to vendors who provide seller financing on an unsecured basis for the sale of goods. The trustee argues that this statute only covers those who provide services and only tangentially covers those who provide goods or parts in the course of making repairs on widgets. At a relief from stay hearing, the court will make only a cursory review of this statute, without conducting any independent research, to determine whether it appears that the creditor has a lien right. In other words, the court will determine whether the movant has a colorable claim - a facially valid lien claim. It will also consider whether the objector has raised colorable defenses that are not mere offsets, but actually would defeat the movant’s claim. See Grella v. Salem Five Cent Savings Bank, 42 F.3d 26 (1st Cir. 1994); In re Tally Well Service, Inc. 45 B.R. 149 (Bankr. E.D. Mich. 1984).

Thus, an adversary proceeding may need to be filed to obtain a final ruling on an issue or, if relief from stay is granted, the parties may continue to dispute their legal rights in a non-bankruptcy court forum. The bankruptcy court’s ruling in a stay relief context does not lead to issue preclusion as to the claim or defense raised.

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