Summary
The United States Bankruptcy Court for the District of Minnesota denied Federal Home Loan Mortgage Corporation's motion for relief from the automatic stay under 11 U.S.C. § 362(d)(1). The court held that the debtor's failure to make at most three post-petition mortgage payments did not constitute cause for stay relief, particularly because the property had substantial equity, the debtor was current on chapter 13 plan payments, and payments to the creditor had continued. The court concluded that the creditor failed to make the required initial showing of cause.
Topics
Practice areas
Questions Presented
- Whether the creditor established cause under 11 U.S.C. § 362(d)(1) to obtain relief from the automatic stay based on the debtor's failure to make up to three postpetition mortgage payments.
- Whether the debtor's postpetition payment default, considered together with the substantial equity in the property and the debtor's continued plan payments, warranted relief from the automatic stay.
Holdings
- A debtor's failure to make plan-related payments, without more, is not per se cause to terminate or modify the automatic stay. Cause must be determined case by case, based on the totality of the circumstances.
- The creditor did not establish cause under § 362(d)(1); the debtor's failure to make at most three mortgage payments, coupled with substantial equity in the property and continued Chapter 13 plan payments, did not warrant relief from the automatic stay.
- Relief was not warranted under § 362(d)(2) because the property had substantial equity and was necessary to the debtor's effective Chapter 13 reorganization.
Key quotations
“There is no per se rule that the lack of plan payments, without more, is cause to lift the stay.” (Conclusion)
“Here, it is clear, the lack of at most three plan payments coupled with significant equity, is not cause to lift the stay.” (Conclusion)
“The Creditor has not met its required and initial burden of proof to show cause under 11 U.S.C. § 362(d)(1) that relief from the stay is appropriate.” (Conclusion)
Factual background
Christopher Justin Risher was a Chapter 13 debtor whose confirmed plan required the trustee to pay the prepetition mortgage arrearage while Risher made postpetition mortgage payments directly to the creditor. The creditor initially alleged three missed payments totaling $3,786.90, but later acknowledged that the default had been reduced to approximately $2,200 and that Risher had continued making payments. The property was valued at approximately $326,700, while the total loan balance was approximately $83,381, creating a substantial equity cushion. Risher was current on his Chapter 13 plan payments, and there was no evidence of fraud, bad faith, inability or unwillingness to pay, or a plan provision authorizing stay relief upon default.
Procedural history
Risher filed a Chapter 13 case on September 15, 2023. His modified Chapter 13 plan was confirmed on August 16, 2024, providing for payment of the prepetition mortgage arrearage through the trustee and direct payment of postpetition mortgage installments. The creditor sought stay relief based on up to three missed postpetition mortgage payments. After multiple continuances and hearings, the bankruptcy court denied the motion because the creditor failed to establish cause under § 362(d)(1).