Relief from Automatic Stay and Adversary Proceeding Protection

Aventura Lawyers Experienced in Bankruptcy Matters

Bankruptcy is both emotionally difficult and technically challenging for business owners and managers undergoing this process. It may be equally challenging for creditors that are concerned about repayment. When a business files for bankruptcy, an automatic stay goes into effect. An automatic stay stops creditors from taking certain kinds of actions. This means that creditors must obtain relief from the automatic stay before proceeding with any effort to collect a debt. Bankruptcy may also be complicated by adversary proceedings. At Stok Folk + Kon, our experienced Aventura bankruptcy attorneys have helped many debtors and creditors with issues related to the automatic stay and adversary proceeding protection.

Relief from the Automatic Stay and Adversary Proceeding Protection

When a bankruptcy petition is filed, an injunction automatically goes into effect under section 362 of the Bankruptcy Code. The stay prevents creditors from acting against the debtor or its assets, and it applies to all creditors, regardless of whether they have notice of the bankruptcy. The stay will be in effect until the case is dismissed, a discharge is entered, or the case is closed. It may not stay in effect if an order terminates, vacates, or modifies it.

Among the actions that are prohibited under an automatic stay governed by Section 362 are the filing or continuing of lawsuits against the debtor that is filing for bankruptcy, exercising set-off rights, and asserting rights against the property of the bankruptcy estate. The lawsuits may take the form of judicial, administrative, or appellate proceedings. The stay does not affect a lawsuit brought by the bankruptcy filer. It also does not extend to claims that arise after a bankruptcy case is already filed.

However, claims include any right to payment, regardless of the nature of that right or whether it has matured. Even sending a demand letter or trying to obtain possession of the bankruptcy estate's property is a prohibited action. There are certain exceptions to this general rule, such as for criminal proceedings or the collection of alimony.

Creditors will need to obtain relief from the court before taking certain actions, such as trying to collect the debt. The automatic stay allows a debtor a chance to reorganize and stops creditors from trying to get an unfair advantage over other creditors by trying to collect sooner.

A motion may be filed by a creditor to obtain relief from an automatic stay, which means that the creditor asks the court to make an exception and allow the creditor to take an action that would normally be prohibited. The motion will be supported by documents, and it must assert a valid perfected security interest, as well as any assertions that there is no adequate protection against collection. The debtor and the trustee who is overseeing the bankruptcy case must respond. Stay relief may be granted in various situations, such as when a debtor merely remains in possession of a piece of real property, but the lender has already completed a foreclosure sale.

Sometimes bankruptcy also involves adversary proceedings under Federal Rule of Bankruptcy Procedure (FRBP) Rule 7001. There are many different types of adversary proceedings, including those to recover money or property, determine the validity of a lien, obtain approval for the sale of an interest of the bankruptcy estate, object to a discharge, or determine the dischargeability of a debt. For most business owners filing for bankruptcy, an adversary proceeding is unfamiliar and stressful. Our firm is familiar with how to pursue and defend against these adversary proceedings.

Consult a Bankruptcy Attorney in the Aventura Area

Bankruptcies may become complicated, particularly when many different creditors are involved. Whether you are a debtor filing for bankruptcy or a creditor, it is important that you obtain legal representation to make sure that a bankruptcy is handled correctly. The Aventura bankruptcy lawyers at Stok Folk + Kon can provide you with experienced and knowledgeable counsel and representation in connection with relief from automatic stay and adversary proceeding protection. We also serve businesses and creditors that need a Chapter 7 or Chapter 11 attorney in Hollywood, Fort Lauderdale, Hallandale, Coral Springs, Pembroke Pines, and other Miami-Dade, Broward and West Palm Beach County cities. Call us at (305) 935-4440 or complete our online form to set up a consultation.