Many creditors have been warned of the need to halt collection efforts once they are put on notice that a debtor has filed for bankruptcy. However, the “why” behind this warning, mainly the automatic stay, is often misunderstood or disregarded. Since violations of the automatic stay can have serious ramifications, it is crucial that creditors know what the automatic stay is, what it protects, and how to get relief from the stay so that the creditor can proceed with collection efforts.
What Is the Automatic Stay? What Does It Protect?
Small businesses often struggle to reorganize in bankruptcy. To address this issue, Congress passed the Small Business Reorganization Act of 2019 (the SBRA). The SBRA took effect in February 2020 and makes small business bankruptcies faster and less expensive.
In a unanimous opinion released last week, the Supreme Court provided guidance as to how to determine the finality of an order in a bankruptcy case for purposes of an appeal under 28 U.S.C. § 158(a). The Court held that the adjudication of a creditor’s motion for relief from stay is properly considered a discrete and independent proceeding within a bankruptcy case and is immediately appealable.