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What Section 362(d)(1) Says
Section 362(d)(1) provides that the court shall grant relief from the automatic stay "for cause, including the lack of adequate protection of an interest in property of such party in interest."
Two critical words in this provision shape the entire analysis:
- "Cause" -- The Bankruptcy Code does not define this term. Courts have broad discretion to determine what constitutes cause on a case-by-case basis. This makes 362(d)(1) the most flexible and most commonly invoked ground for relief.
- "Including" -- Lack of adequate protection is just one example of cause, not an exhaustive definition. Courts have recognized many other forms of cause beyond inadequate protection.
This open-ended standard gives courts wide latitude. Virtually any circumstance that makes it unfair to keep the stay in place can be argued as "cause." But the same flexibility that helps creditors also means there is no automatic formula -- every case turns on its specific facts.
Common Forms of "Cause"
Through decades of case law, courts have identified numerous circumstances that constitute cause under 362(d)(1):
Lack of Adequate Protection
The most common form of cause. The creditor's collateral is losing value (through depreciation, damage, or deterioration) and the debtor is not compensating the creditor for that loss. See our detailed guide on adequate protection for the full analysis under Section 361.
Missed Post-Petition Payments
Failure to make payments on secured debt after filing bankruptcy is the single strongest factual basis for a 362(d)(1) motion. If you stop paying your mortgage or car payment after filing, the creditor can persuasively argue cause. Courts view post-petition defaults very seriously because they suggest the debtor cannot maintain the collateral or fund a reorganization.
Lack of Insurance
Allowing insurance to lapse on collateral puts the creditor at risk of total loss. A house fire, car accident, or equipment theft without insurance coverage eliminates the creditor's protection entirely. Courts consistently find this to be cause for relief.
Property Waste or Deterioration
If the debtor is damaging, neglecting, or dissipating the collateral, the creditor can seek relief. Examples include allowing a house to fall into disrepair, stripping parts from equipment, or failing to maintain property.
Bad Faith Filing
If the bankruptcy was filed primarily to delay or frustrate a specific creditor rather than for a legitimate bankruptcy purpose, courts may find cause for relief. Indicators of bad faith include filing on the eve of a foreclosure sale, filing multiple cases in succession, having no unsecured creditors or minimal debt, and having no realistic prospect of reorganization.
No Prospect of Reorganization
In Chapter 11 or Chapter 13, if the debtor has no feasible plan and no reasonable likelihood of confirming one, continuing the stay serves no bankruptcy purpose. The creditor is being restrained without any corresponding benefit to the debtor's reorganization.
Debtor Misconduct
Hiding, transferring, or misusing the creditor's collateral. Using collateral in unauthorized ways. Refusing to provide information about the collateral's condition or location.
The catch-all nature of "cause": Because cause is undefined, creative creditors' attorneys can argue almost any negative fact pattern constitutes cause. The debtor's best defense is always to address the underlying issue -- make the payments, get insurance, maintain the property -- rather than relying on technical arguments about what "cause" means.
Burden of Proof Under Section 362(g)
The burden of proof in a relief from stay proceeding is split by statute:
- The creditor bears the burden of proof on the issue of whether the debtor has equity in the property (relevant to 362(d)(2), but sometimes raised in a combined motion).
- The debtor bears the burden of proof on all other issues, including whether cause exists under 362(d)(1).
This burden allocation has practical consequences. Once the creditor presents a basic factual showing of cause -- "the debtor has missed three payments" or "the debtor has no insurance" -- the burden shifts to the debtor to demonstrate why the stay should remain in place. Simply denying the creditor's allegations is not enough. The debtor must present affirmative evidence or a concrete proposal to address the creditor's concerns.
Practical impact: Because the debtor bears the burden on cause, showing up to the hearing without evidence or a plan is nearly certain to result in the motion being granted. Come prepared with proof of payments, proof of insurance, and a concrete proposal for adequate protection going forward.
Defending Against a 362(d)(1) Motion
The best defenses match the specific form of "cause" alleged:
If the Issue Is Missed Payments
- Propose adequate protection payments going forward and commit to a specific start date.
- If you have already caught up on missed payments, bring proof of the payments made.
- If your Chapter 13 plan provides for the creditor's claim, point the court to the plan provisions.
If the Issue Is Insurance
- Obtain insurance immediately and bring the declarations page to the hearing.
- If the lapse was temporary and unintentional, explain the circumstances and show reinstatement.
If the Issue Is Bad Faith
- Demonstrate legitimate bankruptcy purpose: unsecured debts being discharged, income freed up for plan payments, meaningful reorganization in progress.
- Show the court that the case is not just about one creditor -- there are other debts, other creditors, and a genuine financial fresh start at stake.
If the Issue Is No Prospect of Reorganization
- File a plan (or show the court a filed plan) that demonstrates a feasible path to reorganization.
- Present income evidence showing you can fund the plan.
- If plan confirmation is imminent, ask for a brief continuance to allow confirmation to occur.
For a complete step-by-step guide, see How to Respond to a Motion for Relief from Stay.
Connection to Automatic Stay Violations
It is important to distinguish between a creditor properly seeking relief from stay and a creditor that acts without court permission. Under Section 362(k), a creditor that willfully violates the automatic stay is liable for actual damages, including costs and attorney fees, and in appropriate cases, punitive damages.
A creditor must first obtain a court order granting relief from stay before taking any action against the debtor or the property. Filing the motion is not enough -- the creditor must wait for the court's ruling. A creditor that repossesses a car or proceeds with foreclosure before the court grants relief is violating the stay, even if the creditor has strong grounds for relief.
Frequently Asked Questions
What counts as cause for relief from stay under 362(d)(1)?
The Bankruptcy Code does not define "cause." Courts have found cause in many situations, including: failure to make post-petition payments, lack of insurance on collateral, property deterioration or waste, bad faith filing, no reasonable prospect of reorganization, and repeated defaults despite prior agreements. Lack of adequate protection is the most commonly cited form of cause.
Who has the burden of proof for "cause" under 362(d)(1)?
Under Section 362(g), the burden of proof is split. The creditor bears the burden on the issue of the debtor's equity in property. On all other issues -- including whether cause exists -- the party opposing relief (the debtor) bears the burden. This means once the creditor raises a colorable argument for cause, the debtor must affirmatively show why the stay should remain in effect.
Can bad faith filing be considered cause for lifting the stay?
Yes. If the court finds that the bankruptcy was filed primarily to delay a creditor rather than for a legitimate bankruptcy purpose, the filing may be considered "bad faith" and constitute cause for relief from stay. Courts look at factors such as the timing of the filing, the debtor's history of filings, whether the debtor has any realistic reorganization plan, and whether the case was filed on the eve of a foreclosure or other creditor action.
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