Chapter 27 - § 27.7 • AUTOMATIC STAY
| Jurisdiction | Colorado |
§ 27.7.1—Purpose of Automatic Stay
The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his or her creditors.128 It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressure which drove him or her into bankruptcy.
§ 27.7.2—Operation of Automatic Stay
Subject to certain exceptions, a petition filed in bankruptcy (except in a case ancillary to foreign proceedings129 ) operates as a stay, applicable to all entities, of, among others, the following:130
• The commencement or continuation131 of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case, or to recover a claim against the debtor that arose before the commencement of the case;132
• The enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case;
• An act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
• An act to create, perfect, or enforce any lien against property of the estate. The filing of an attorney's charging lien violates the automatic stay;133
• An act to create, perfect, or enforce against property of the debtor a lien to the extent that the lien secures a claim that arose before the commencement of the case; and
• An act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case.
The automatic stay provision does not require any notice before the creation and perfection of new liens will be stayed, and supersedes any state law to the contrary.134
Among the exceptions to the automatic stay are the following:135
• Any act to perfect, or to maintain or continue the perfection of, an interest in property to the extent that the trustee's rights and powers are subject to such perfection136 or to the extent that the act is accomplished within the period provided in § 547(e)(2)(A);
• The commencement of any action by the Secretary of Housing and Urban Development to foreclose a mortgage or deed of trust in any case in which the mortgage or deed of trust held by the Secretary is insured or was formerly insured under the National Housing Act and covers property, or combinations of property, consisting of five or more living units;
• Any act by a lessor to the debtor under a lease of nonresidential real property that has terminated by the expiration of the stated term of the lease before the commencement of or during a case to obtain possession of the property.
The automatic stay pertains only to actions involving the debtor or property of the estate.137 It applies to activities against the debtor in whatever capacity the debtor may be acting.138 It does not apply to actions by the debtor where no affirmative action against the debtor is involved.139 It does, however, apply to prevent a debtor from proceeding with an appeal where the original action was commenced against the debtor.140
The automatic stay does not apply to post-petition obligations of the debtor141 or, apparently, of the estate.142
Neither the running of the redemption period143 nor the filing of a notice of intent to redeem by a junior lienor is stayed by the automatic stay.144 A request for the issuance of a public trustee's deed is not a violation of the automatic stay; vesting of title at the end of the redemption period is automatic and is not affected by the issuance (or lack of issuance) of a public trustee's deed, which is merely a ministerial function confirming the vesting of title.145
The termination of a contract by its terms is not a violation of the automatic stay.146 Similarly, the post-petition acceleration of a note pursuant to a pre-petition notice is not stayed by the automatic stay.147
The foreclosure of a lien which the creditor was granted upon confirmation of a plan as security for the payments to be made as agreed under the plan upon the debtor's post-confirmation default in the performance of his or her obligations under the plan does not constitute an act to enforce a pre-petition lien or to collect a pre-petition claim, but rather the enforcement of a new agreement evidenced by the plan, and therefore it is not a violation of the automatic stay.148
Actions taken in violation of the automatic stay are void, even when there is no actual notice of the existence of the stay.149 Nevertheless, equitable principles may, in some circumstances, be applicable to claimed violations of the stay. For example, courts will apply equitable considerations where the creditor was without actual knowledge of a bankruptcy petition and the debtor's unreasonable behavior contributed to the creditor's plight.150
Unless relief from stay is granted, the automatic stay of an act against the property of the estate continues until the property is no longer property of the estate;151 the stay of any other act continues until the earliest of the time the case is closed, the time the case is dismissed, or, if the case is a case under Chapter 9, 11, 12, or 13, the time a discharge is granted or denied.152 Special provisions regarding the automatic stay and relief therefrom apply in the case of an individual debtor if a single or joint case of the debtor was pending within the preceding one-year period but was dismissed,153 or if two or more single or joint cases of the debtor were pending within the previous year but were dismissed.154
§ 27.7.3—Relief from Stay
On request of a party in interest155 and after notice and a hearing, the court will grant relief from the automatic stay, such as terminating, annulling, modifying, or conditioning the stay, (1) for cause, including lack of adequate protection of an interest in property of the party in interest,156 (2) 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,157 or (3) subject to certain conditions, with...
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