Necessary to an Effective Reorganization

A concept in stay relief litigation where a secured creditor seeks relief on the basis that a debtor has no equity in certain property and that the property is not necessary to an effective reorganization. If the creditor can show that the debtor has no equity in the property, the burden then falls to the debtor to show that the property is “necessary to an effective reorganization.” This means that the debtor must show not just that the debtor cannot reorganize without the asset in question but also that a reorganization “is reasonably in prospect,” meaning, in turn, that there is a decent chance that a plan can be confirmed in the case. In most cases, debtors are given leeway with respect to this burden early in the case, leeway that diminishes with the passage of time.

Bankruptcy Code § 362(d)(2)(B). See also Motion for Relief from Stay.

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