The stay that takes effect on filing without any order, the acts it stops and the proceedings it does not, relief from the stay and the grounds for it, the stay's shorter life for a repeat filer, use of cash collateral and the protection a lender is given, financing obtained after the filing, paying wages and critical suppliers, and the penalty for acting in violation of the stay.
Section 362(e)(1) terminates the stay thirty days after a request for relief from a stay of an act against estate property, as to the requesting party, unless the court after notice and a hearing orders it continued. The hearing may be preliminary or consolidated with the final hearing. Where it is preliminary, the court must order continuation if there is a reasonable likelihood that the party opposing relief will prevail, and the final hearing must conclude within thirty days after it.
Section 362(c)(3) provides that where an individual debtor had a case pending within the preceding year that was dismissed, the stay terminates on the thirtieth day after the later filing with respect to the debtor. Section 362(c)(4) provides that where two or more such cases were dismissed, no stay goes into effect at all. In each situation a party in interest may move to continue or impose the stay, and must demonstrate that the later filing is in good faith.
First-day hearings are held within days of a business filing, on shortened notice, to authorize what the debtor needs to keep operating. Rule 6003 prohibits granting listed applications within twenty-one days after the petition is filed unless relief is needed to avoid immediate and irreparable harm, and expressly does not apply to motions under Rule 4001. Cash collateral and financing are therefore heard first, with final hearings following after full notice.
Section 362(a) provides that the filing of a petition operates as a stay, applicable to all entities, of eight described categories of act. It takes effect on filing, requires no order, and binds parties who have no knowledge of the case. Its two branches expire on different terms: the stay of acts against estate property continues while the property remains estate property, and the stay of other acts continues until the case closes, is dismissed, or a discharge is granted or denied.
Section 364 authorizes credit in ascending order. Ordinary-course unsecured credit is allowable as an administrative expense without an order. Other unsecured credit requires notice and a hearing. Where unsecured credit is unavailable, the court may authorize superpriority, a lien on unencumbered property, or a junior lien. A senior or equal lien over existing collateral requires both that credit was unobtainable otherwise and that the existing lienholder is adequately protected.
Adequate protection compensates an entity for a decrease in the value of its interest in property caused by the stay, by the use, sale or lease of the property, or by the grant of a lien. Section 361 permits cash payments, an additional or replacement lien, or other relief producing the indubitable equivalent, but not an administrative expense claim. The measure is the decline in the value of the interest, not the value of the collateral or the amount of the debt.
Most circuits treat acts taken in violation of the automatic stay as void, while others treat them as voidable and capable of validation by annulment. Section 362(k) provides that an individual injured by a willful violation shall recover actual damages, including costs and attorneys' fees, and may recover punitive damages in appropriate circumstances. Willfulness generally means knowledge of the case and an intentional act, not an intent to violate the stay.
Wages, salaries and commissions earned within one hundred eighty days before the filing or the cessation of business have a statutory priority, capped per individual and adjusted at intervals. First-day motions ask to pay those claims immediately rather than at distribution, on the reasoning that priority claimants would be paid in full anyway. Critical vendor orders rest on a different and contested foundation, and courts have divided on the authority for them.
Section 362(b) excludes described acts from the automatic stay entirely. Criminal proceedings, most family law matters, governmental police and regulatory enforcement other than money judgments, certain acts of perfection, and specified financial contract rights all continue without relief from the court. An act within an exception requires no order; an act outside one is a violation even if the creditor believed an exception applied.
Section 363(c)(2) prohibits the trustee or debtor in possession from using cash collateral unless each entity with an interest in it consents or the court authorizes the use after notice and a hearing. Cash collateral is defined broadly to include deposit accounts, negotiable instruments, and the proceeds, products, rents and profits of collateral. The rule requires a motion with a concise statement of material terms, and permits a preliminary hearing before the ordinary notice period expires.
On request of a party in interest and after notice and a hearing, section 362(d) directs the court to grant relief from the stay by terminating, annulling, modifying or conditioning it. The grounds are cause, including lack of adequate protection; the combination of no equity in property and no necessity for an effective reorganization; a single asset real estate ground; and a ground for real property subject to a scheme to delay or defraud creditors. Burdens are split by statute.
