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Objection to Motion of Relief from Automatic Stay
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I would like to object to a motion of relief from stay on a 4plex investment property that I own in Georgia that I inlcuded on my ch.7 case filed in Cali. The primary reason given by the bank is inadequate protection, negative equity, and arrears in payments. I only have two units rented currently and the bank will not take partial payments. I was making up the other two payments until beng laid off from my W2 job in May. What does inadequate protection mean and what defense if any, can I use for my objections?
The creditor has likely sought relied under 11 U.S.C. 362(d)(1), which provides that upon appropriate notice and a showing of cause, which showing can include a lack of "adequate protection", a party may terminate the stay as it applies to the collateral. "Adequate protection" protects the secured creditor from a decrease in the value of the creditor's interest in such property during the bankruptcy case. With respect to real property, it is essentially the value of the property above the debt due and secured by the property.
Adequate protection is often discussed as the "equity cushion". Here, as claimed by the bank, there is negative equity in the property, such that there is no equity cushion to protect the bank. Since the collateral is diminishing in value and has no value to the trustee for the purpose of administering your case, the bank wishes to lift the stay so that it can seek other remedies, presumably foreclosure, for the purpose of liquidating the property and applying the proceeds to the loan.
To defeat the motion you should objection in writing within the time for objections set forth in the motion. Local bankruptcy rules may dictate how many days prior to the return date you must file and serve any objection.
Your objection must be more than self serving to overcome the bank's proof. You could attack the bank's proof.
For example, have they demonstrated that they hold the mortgage? If the moving party is not the party that was granted the mortgage, it should attach proof of assignment of the debt to its motion. Without this proof, it lacks standing to make the motion.
Have they submitted proof of value such that there is no equity? Some court's may find that a conclusory statement by the bank as to the value of the property is not enough. Most court's would require some valuation in support. You could, with appropriate support, argue that there exists equity well above the debt due such that the bank is protected. To the extent you think that the market value or value based on rent is greater such that there exists an equity cushion, you would want to support that with an appraisal or some other well founded evidence.
The foregoing is for informational purposes and is not legal advice. Your should consult with qualified bankruptcy counsel admitted to practice in your jurisdiction.
