Relief From the Stay and the Grounds for It

The stay is a general prohibition, and relief is the mechanism for making exceptions to it case by case. The statute is drafted in mandatory terms: on request of a party in interest and after notice and a hearing, the court shall grant relief on the grounds listed. The real question in most motions is therefore whether a listed ground exists, not whether the court is inclined to help.

The motion and who must be served

A motion under section 362(d) is a contested matter and proceeds under the rule governing them. It must be served on the committee elected or appointed in the case, or on the committee's authorized agent; where the case is under chapter 9 or chapter 11 and no unsecured creditors' committee has been appointed, on the creditors included on the list filed under the rule requiring the largest unsecured creditors to be identified; and on any other entity the court designates.

The same rule governs a request to prohibit or condition the use, sale or lease of property, which is the parallel remedy for an entity whose interest in property is being used rather than merely held. The two are frequently filed together, because a creditor objecting to the debtor's continued use of collateral is often seeking either possession or protection.

Relief without prior notice is available on a narrow showing. Specific facts in an affidavit or verified motion must clearly demonstrate immediate and irreparable injury, loss or damage before the adverse party can be heard, and counsel must certify what efforts were made to give notice. A party who obtains relief that way must immediately give oral notice to the debtor and the trustee and promptly send them the order, and the adverse party may move on two days' notice to reinstate the stay.

Cause, including lack of adequate protection

The first ground is cause, including the lack of adequate protection of an interest in property of the party in interest. The statute does not define cause, and courts have treated it as an open category filled by circumstance rather than by rule.

Lack of adequate protection is the named example and the most common one. A secured creditor whose collateral is depreciating while the case runs, and who is receiving nothing to compensate for the decline, has the paradigm case. What counts as protection, and how the decline is measured, are examined in the analysis of what adequate protection means.

Insurance is the recurring practical version of the same argument. A creditor whose collateral is uninsured faces an uncompensated risk of total loss rather than a gradual decline, and courts have treated a lapse in coverage as cause almost without argument. The usual outcome is a conditional order requiring proof of coverage within a short period.

Cause reaches beyond collateral. Motions are regularly granted to allow a pending action in another forum to proceed to judgment where the issues are unrelated to the reorganization and liquidation elsewhere is more efficient, with enforcement of any resulting money judgment remaining stayed. Bad faith in the filing is also asserted as cause, and where established it can support dismissal as well as relief.

No equity, and not necessary to a reorganization

The second ground is conjunctive and is often argued as though it were not. Relief is available with respect to a stay of an act against property if the debtor does not have an equity in the property and the property is not necessary to an effective reorganization. Both limbs must be satisfied.

Equity here compares the value of the property against the total of the liens on it, not against the movant's lien alone. A property worth less than the aggregate secured debt supports the first limb regardless of where the movant sits in the lien order.

Valuation therefore does most of the work on the first limb, and it is contested on the same terms as anywhere else in the case. The movant usually offers an appraisal; the debtor offers another, or argues that the valuation standard should reflect the use the property is being put to rather than a forced sale. Where the margin is narrow, the first limb can fail on the evidence alone.

The second limb has been read as requiring more than a wish. It is not enough that the property would be useful; courts have required that an effective reorganization be in prospect, meaning a reasonable possibility of a successful reorganization within a reasonable time. In a liquidating case, or where no plan is realistically available, the limb is rarely satisfied.

Burdens, timing and what the order says

The statute splits the burden in an unusual way. In a hearing on relief, the party requesting relief has the burden of proof on the issue of the debtor's equity in property, and the party opposing relief has the burden of proof on all other issues. A movant therefore proves the value and the liens; the debtor proves that the property is necessary to an effective reorganization, that protection is adequate, or that no cause exists.

Two other grounds appear in the subsection. Relief is available against single asset real estate where the debtor has not, within the statutory period, filed a plan with a reasonable possibility of confirmation or commenced monthly payments at the nondefault contract rate on the value of the creditor's interest. Relief is also available where the filing was part of a scheme to delay, hinder or defraud creditors involving unauthorized transfers of interests in the real property or multiple filings affecting it.

The order itself is where much of the negotiation lands. Relief is frequently conditioned rather than granted outright — a payment schedule, an insurance requirement, or a deadline after which relief becomes effective without further hearing. Timing is governed by the statutory clock for hearing a stay motion, and until an order is entered and effective the prohibition described in the freeze that began on filing continues to apply.