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automatic stay so that secured creditor could proceed with scheduled foreclosure sale of alleged debtor's real property, failed to show a substantial possibility of success on the merits of its appeal; because court terminated the automatic stay on the bases that there was no equity in the property and that the property was not necessary for an effective reorganization, and not so that secured creditor could litigate in another forum. The court was not required to consider the Second Circuit's Sonnax factors, petitioning creditor did not dispute that debtor lacked equity in the property, debtor's inability to fund a plan and its inability to confirm a plan precluded it from having a reasonable possibility of an effective reorganization, and so success on the merits of petitioning creditor's appeal was unlikely if not impossible. Additionally, though debtor operated a utility company that supplied water to 48 homes, there was no evidence that the public interest would be harmed by failing to issue such a stay. Petitioning creditor's blanket assertions that residents would be harmed if alleged debtor's property were sold did not amount to evidence, as was petitioning creditor's burden.
iii. In re Harenberg, 491 B.R. 706 (Bankr. D. Md. 2013)
Issue: Whether debtor met the elements required for a stay pending appeal of the bankruptcy court's order denying confirmation and disapproving the disclosure statement, the bankruptcy court's order to show cause as to why a trustee should not be appointed, and the bankruptcy court's order denying the debtor's motion for partial reconsideration and converting the case to a Chapter 7.
Holding: The court denied the debtor's motion for a stay pending appeal because the debtor failed to meet the required elements. After outlining numerous examples of the debtor's persistent bad faith, such as claiming exemptions greater than the law allows and putting misleading information in the disclosure statements, the court looked for whether the debtor showed: "(1) there is a likelihood of success on the merits of the appeal; (2) she will suffer irreparable injury if the stay is denied; (3) other parties will not be substantially harmed by the stay; and (4) the public interest will be served by granting the stay." The court cited several flaws in the debtor's fourth amended plan that would make it un-confirmable, particularly the lack of good faith shown throughout the bankruptcy. The court concluded "that the appeal has no likelihood of success." The court then reasoned that the debtor created her own situation even if a denial of her motion would cause her irreparable injury. The court found that the creditors have already been injured by the debtor's two-and-a-half-year delay and the imposition of a stay would simply prolong that injury. Lastly, the court found that public policy promoted "honesty and forthrightness in judicial proceedings." Taken together, the court denied the debtor's motion for stay pending appeal.
©2014 William L. Norton III
