In a recent bankruptcy filing where a debtor’s homestead exemption was successfully challenged, the debtor filed a Motion For Stay Pending Appeal. What this means is that the debtor wanted to stop the creditors from repossessing his property while he appealed the decision to strike down the homestead exemption. But, for a debtor to win a stay in bankruptcy they need to meet certain criteria.
- A stay will only be granted if there is a likelihood that the appeal will be successful on its merits. This means that debtors can’t simply stay an action based on an appeal which has no chances of winning.
- Failure to grant the stay would cause irreparable injury to the debtor. For example, the total destruction of a property, such as bulldozing a building would cause irreparable harm to the debtor. In other words it could not be undone.
- Granting the stay would not substantially harm the other parties in the bankruptcy. If other parties in the bankruptcy would suffer major injury then the stay would not be granted.
- Granting the stay would serve the public interest. For example, if a debtor has a company cleaning up a toxic waste dump, staying any action that would prevent that clean up would benefit the public interest.
Failure to meet a satisfactory combination of these requirements would compel the bankruptcy court to deny the stay. Many debtors trying to win a stay fail to present an argument that their appeal would be convincing enough to win.