Local Rule 4001-1: Relief from Stay; Use of Cash Collateral; Post-Petition Credit

LOCAL RULE 4001-1 Relief from Stay; Use of Cash Collateral; Post-Petition Credit

(a) Procedures Applicable to Motions for Relief from Stay in All Chapters.

1) Motions for relief from the automatic stay of 11 U.S.C. § 362(a) shall be set for hearing in accordance with LBR 9014-1. Motions seeking to invoke the time constraints of 11 U.S.C. § 362(e) must be set for hearing pursuant to Paragraph (f)(1) of LBR 9014-1.

2) Relief from the automatic stay will not be granted if the movant utilizes the notice and opportunity for hearing procedure defined in 11 U.S.C. § 102(l). A hearing must be set on every motion for relief from the automatic stay. See LBR 9014-1.

3) With all motions for relief from stay, the movant shall file and serve as a separate document completed Form EDC 3-468, Relief from Stay Summary Sheet.

(b) Additional Procedures Applicable to Motions for Relief from Stay in Chapter 12 and 13 Cases.

1) If the motion alleges that the debtor or the trustee has failed to maintain post-petition payments on an obligation secured by real or personal property, including, but not limited to, installment payments and lease payments, the motion shall:

A) Include a verified statement showing all post-petition payments and other obligations that have accrued and all payments received post-petition, the dates of the post-petition payments, and the obligation(s) to which each of the post-petition payments was applied;

B) State whether a contract or applicable nonbankruptcy law requires that the debtor be given a statement, payment coupon, invoice, or other comparable document and whether such document was sent to the debtor or the trustee for any post-petition payment(s) allegedly not made by the debtor or the trustee; and C) State whether the debtor or the trustee was advised prior to the filing of the motion of the alleged delinquency and given an opportunity to cure it, if a document of the kind described in the preceding subparagraph was not sent, or if a contract or applicable nonbankruptcy law does not require one to be sent.

2) If the motion alleges the debtor has failed to make plan payments to the chapter 12 or 13 trustee, the movant shall include in the motion a certification that the movant or its counsel conferred with the chapter 12 or 13 trustee before the motion was filed and confirmed that the alleged delinquency under the plan was outstanding within fourteen (14) days of the filing of the motion. This requirement may be satisfied by downloading from the trustee's website, and attaching to the motion, a report indicating that the alleged delinquency was outstanding within fourteen (14) days prior to the filing of the motion. If the movant does not confer with the trustee, the motion shall detail the attempts made to confer with the trustee or explain why no such attempt was made.

(c) Motions Regarding Use of Cash Collateral and Post-Petition Financing Agreements.

1) Motions for authorization to use cash collateral or for approval of a cash collateral or post-petition financing agreement shall be set for hearing in accordance with LBR 9014-1.

2) Authorization to use cash collateral, or to obtain post-petition financing, will not be granted if the movant uses the notice and opportunity for hearing procedure defined in 11 U.S.C. § 102(l).

3) The motion must recite whether the proposed cash collateral or post-petition financing agreement contains any provision described below and must identify any such provision. Absent substantial justification such provision will not be approved.

A) Cross-collateralization clauses, i.e., clauses that secure pre-petition debt by post-petition assets in which the secured party would not otherwise have a security interest by virtue of its pre-petition security agreement. See 11 U.S.C. § 552.

B) Provisions or findings of fact that bind the estate or all parties in interest with respect to the validity, perfection, or amount of the secured party's lien or debt.

C) Provisions or findings of fact that bind the estate or all parties in interest with respect to the relative priorities of the secured party's lien and liens held by persons who are not parties to the stipulation. (This would include, for example, an order approving a stipulation providing that the secured party's lien is a "first priority" lien.)

D) Waivers of 11 U.S.C. § 506(c), unless the waiver is effective only during the period in which the debtor is authorized to use cash collateral or borrow funds.

E) Provisions that operate to divest the debtor-in-possession of any discretion in the formulation of a plan or administration of the estate or limit access to the court to seek any relief under other applicable provisions of law.

F) Releases of liability for the creditor's alleged pre-petition torts or breaches of contract.

G) Waivers of avoidance actions arising under the Bankruptcy Code.

H) Automatic relief from the automatic stay upon default, conversion to chapter 7, or appointment of a trustee.

I) Waivers of the procedural requirements for foreclosure mandated under applicable nonbankruptcy law.

J) Adequate protection provisions that create liens on claims for relief arising under the Bankruptcy Code (see 11 U.S.C. §§ 506(c), 544, 545 and 547-549).

K) Waivers, effective on default or expiration, of the debtor's right to move for a court order pursuant to 11 U.S.C. § 363(c)(2)(B) authorizing the use of cash collateral in the absence of the secured party's consent.

L) Findings of fact on matters extraneous to the approval process. (For example, in connection with an application to borrow on a secured basis, a finding that the debtor cannot obtain unsecured credit would be acceptable, whereas a "finding" that the lender acted in good faith in declaring the pre-petition loan in default would not be acceptable.)

4) The following provisions may be included in a cash collateral or post-petition financing agreement without the need for special identification or explanation:

A) Withdrawal of consent to use cash collateral or termination of further financing, upon occurrence of a default or conversion to chapter 7.

B) Securing any post-petition diminution in the value of the secured party's collateral with a new lien on post-petition collateral of the same type as the secured party had pre-petition, provided such lien shall be subordinated to the compensation and expense reimbursement (excluding professional fees) allowed to any trustee thereafter appointed in the case.

C) Securing new advances or value diminution with a lien on other assets of the estate, provided the lien shall be subordinated to all the expenses of administration (including professional fees) of any trustee thereafter appointed in the case.

D) Reservations of rights under 11 U.S.C. §507(b), provided the agreement may not modify the Bankruptcy Code's priorities in the event of a conversion to chapter 7. See 11 U.S.C. §726(b).

E) Reasonable reporting requirements.

F) Reasonable budgets and use restrictions.

G) Expiration date for the agreement.

(d) Certification of Service of Motions for Relief from Stay, for Use of Cash Collateral and to Approve Post-Petition Financing Agreements in Chapter 11 Cases. In chapter 11 cases, the party seeking relief shall certify that the twenty (20) largest unsecured creditors as listed in the debtor's Schedule B104 have been served with a copy of any Motions for Relief From Stay, For Use of Cash Collateral and to Approve a Post-Petition Financing Agreement, or if a committee of unsecured creditors has been formed, that all committee members and committee counsel have been served. See Fed. R. Bankr. P. 4001(a)(1).