Lari Graham Bollinger and Pam Kay Bollinger

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	LARI GRAHAM BOLLINGER and 	No. 13-10-13688 JR
PAM KAY BOLLINGER,
Debtors.
ORDER CONDITIONING AUTOMATIC STAY
THIS MATTER is before the Court on a Motion for Relief from the Automatic Stay and
for the Abandonment of Property to EverHome Mortgage Company (“Motion for Relief from
Stay”). 	The Court held a final hearing on the Motion for Relief from Stay on April 5, 2011 in
Roswell, New Mexico, and took the matter under advisement. 	EverHome Mortgage Company
(“EverHome”) appeared at the final hearing through its counsel of record, Little & Dranttel, P.C.
(Timothy J. Murphy), and Lari Graham Bollinger appeared, pro se. 	After consideration of the
evidence presented at the final hearing, and being otherwise sufficiently informed, the Court
finds that cause exists to modify the automatic stay if certain conditions are not satisfied.
Consequently, the Court will condition the continuation of the stay as set forth below.
FACTS
1. 	EverHome is the holder of a note dated February 6, 2006 executed by the Debtors
in the principal amount of $40,000 (the “Note”).
2. 	The Note is secured by a mortgage dated February 6, 2006 (the “Mortgage”) on
certain real property located at 1610 South Globe Ave., Portales, New Mexico (“Property”).
3. 	The regular monthly payments due under the Note and Mortgage consist of
principal and interest in the amount of $279.69, plus an escrow component consisting of the
insurance premium for a homeowners’ insurance policy and estimated property taxes.
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4. 	EverHome sued the Debtors in the Ninth Judicial District Court for the State of
New Mexico, Roosevelt County (“State Court”) as Case No. D-911-CV-2009-00222 to foreclose
the Note and Mortgage (“State Court Action”).
5. 	EverHome obtained a Summary Judgment, Default Judgment and Order of
Foreclosure Sale in the State Court Action (“Judgment”). 	The Judgment authorized the sale of
the Property by special master.
6. 	A special master’s sale of the Property was conducted pursuant to the Judgment.
7. 	Debtors filed a voluntary petition for relief under Chapter 13 of the Bankruptcy
Code on July 23, 2010, before the State Court approved the special master’s sale of the Property.
8. 	The State Court did not consider approval of the special master’s sale of the
Property as a result of the automatic stay arising upon the filing of the Debtors’ bankruptcy
petition.
9. 	The Debtors were in default of the payments due under the Note and Mortgage as
of the date they filed their voluntary bankruptcy petition.
10. 	Post-petition, the Debtors made two payments to EverHome: 1) a payment of
$280.00; and 2) a payment of $20.00. 	EverHome credited these payments to fees and to the
escrow account. See Exhibit 6.
11. 	Debtors have failed to make any other post-petition payments due under the Note
and Mortgage.
12. 	The Property was covered by a homeowners’ insurance policy from The Hartford
Insurance Company (the “Hartford Policy”).
13. 	The Hartford Policy was renewed in late 2009 for a renewal period effective
February 6, 2010 to February 6, 2011. See Docket No. 47.
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14. 	During the course of the bankruptcy case, the Debtors insisted that the Hartford
Policy had been cancelled, yet EverHome, through its attorneys of record, represented to the
Court and to the Debtors that the Debtors were mistaken, that the homeowners’ insurance
coverage under the Hartford Policy remained in force, that it paid the insurance premium for the
Hartford Policy through February 6, 2011, and that the Hartford Policy had not been cancelled.
15. 	Based on these representations by EverHome, on December 22, 2010 the Court
entered an Order Resulting from Status Conference on EverHome Mortgage Company’s Motion
for Relief from Stay (“Order Regarding Insurance”).
16. 	The Order Regarding Insurance provided, in part, that
based on EverHome’s representations and the Debtors’ reliance on those representations,
that EverHome will be financially responsible for any losses or other triggering event that
would have been covered by the homeowners insurance had it not been cancelled, in the
event that the coverage has been terminated, until such time as coverage is reinstated
through at least February 6, 2011.
17. 	A letter from The Hartford Insurance Company to EverHome, dated December
27, 2010, reflects that coverage under The Hartford Policy ended as of September 23, 2010. See
Exhibit 11.
18. 	EverHome purchased lender-placed insurance on the Property from American
Security Insurance Company (“Lender Policy”). 	A copy of the Additional Insured Endorsement
from the Lender Policy reflects a policy date of February 20, 2011, with an effective date of
September 23, 2010 and an expiration date of September 23, 2011. See Exhibit 12. 	There is no
evidence before the Court of any other insurance policy in effect covering the Property.
19. 	The Lender Policy has a policy limit of $138,000, and covers only buildings and
structures. Id.
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20. 	On or about February 4, 2011, the plumbing pipes in the Property froze, burst, and
caused damage to the Property.
21. 	Subsequent to the freeze, the Property was damaged by fire.
22. 	Mr. Bollinger testified that the damage included a substantial loss of personal
property located within the dwelling on the Property.
23. 	As of the date of the final hearing on the Motion for Relief from Stay, the
Property had not been inspected by an insurance adjuster.
24. 	The Debtors set aside funds to make payments due under the Note and Mortgage
for a period of time post-petition, but because the damage to the Property caused them to incur
additional expenses they are not now in a position to cure the post-petition amounts due under
the Note and Mortgage in a lump sum payment.
DISCUSSION
Relief from the automatic stay is governed by 11 U.S.C. § 362(d), which provides, in
relevant part:
On request of a party in interest and after notice and a hearing, the court shall
grant relief from the stay provided under subsection (a) of this section, such as by
terminating, annulling, modifying, or conditioning such stay—
(1) for cause, including the lack of adequate protection of an interest in
property of such party in interest;
(2) with respect to a stay of an act against property under subsection (a) of
this section, if –
(A) the debtor does not have an equity in such property; and
(B) such property is not necessary to an effective
reorganization.
11 U.S.C. § 362(d).
Because relief under this section includes terminating, annulling, modifying or conditioning the
stay, the bankruptcy court enjoys “wide latitude in crafting relief from the automatic stay.” In re
Delaney-Morin, 304 B.R. 365, 369 (9th Cir. BAP 2003). “Conditional orders are expressly
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contemplated by [11 U.S.C. ] § 362(d) and absolutely crucial to the administration of bankruptcy
cases in a varying range of circumstances.” In re Derringer, 375 B.R. 903, 911-12 (10th Cir.
BAP 2007). “Cause” for relief from the automatic stay under 11 U.S.C. §362(d) is “a separate
discretionary basis on which the bankruptcy court may lift the stay.” Carbaugh v. Carbaugh (In
re Carbaugh), 278 B.R. 512, 525 (10th Cir. BAP 2002). 	Ultimately, because the Bankruptcy
Code does not further define “cause,” the Bankruptcy Court must make a discretionary
determination of whether to grant relief from the automatic stay on a case-by-case basis.1
EverHome seeks relief from the automatic stay so that it can complete its foreclosure
action and obtain an order confirming the pre-petition foreclosure sale of the Property. In its
Motion for Relief from Stay, EverHome alleged that the Debtors are in default under the Note
and Mortgage, including failure to make both pre- and post-petition mortgage payments, that
there is no equity in the Property, that the Debtors cannot offer adequate protection, and that the
Property “may be burdensome to the estate and may be of no consequential value and benefit to
the estate.” 	See Motion for Relief from Stay (Docket No. 21). 	EverHome did not present
evidence regarding the value of the Property. EverHome seeks relief from the automatic stay
based on the Debtors’ pre- and post-petition arrearages under the Note and Mortgage, the
damage to the Property, and the commencement of the bankruptcy case on the eve of
consummation of a foreclosure sale.
An ongoing post-petition default in a debtor’s payment of the regular mortgage payments
can constitute sufficient cause for relief from the automatic stay.2 Once a creditor makes an
1 Pursifull v. Eakin, 814 F.2d 1501, 1506 (10 th Cir. 1987). See also, In re Avila, 311 B.R. 81, 83-84 (Bankr.N.D.Cal.
2004)(“Exercising discretion in determining cause for stay relief requires the balancing of hardships and
consideration of the totality of the circumstances.”)(citing In re Kennedy, 165 B.R. 488, 490 (Bankr.W.D.Wash.
1994)).
2In re Binder, 224 B.R. 483, 491 (Bankr.D.Colo. 1998)(finding that cause existed to grant creditor relief from the
automatic stay based on debtor’s default in post-petition monthly payments with no current ability to cure, no equity,
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initial showing that cause exits to grant relief from the stay3 , the burden shifts to the debtors to
establish that they are entitled to continuation of the automatic stay.4
In this case, EverHome has demonstrated that: 1) the Debtors have failed to make post-
petition payments due under the Note and Mortgage, except for payments of $280.00 and $20.00
in September of 2010; 2) the Debtors are unable at the present time to bring those payments
current; and 3) the value of the Property has likely declined post-petition due to the freezing
pipes and subsequent fire. Such evidence suggests that EverHome has made an initial showing
of cause for relief from the automatic stay under 11 U.S.C. § 362(d). However, other evidence
presented by the Debtors at the final hearing and the record of this case mitigate in favor of
conditioning a grant of relief from the automatic stay.
Whether and to what extent insurance will cover the damage to the Property and its
contents has not been determined. It is possible that insurance proceeds will be sufficient to cure
both pre- and post-petition defaults under the Note and Mortgage and leave EverHome fully
secured. Further, the Order Regarding Insurance obligates EverHome to accept responsibility for
any losses or other triggering event that would have been covered by the Hartford Policy through
February 6, 2011. Under these circumstances, the Court finds that the automatic stay should
and no demonstration that the property is necessary to the performance of her Chapter 13 plan); In re Delaney-
Morin, 304 B.R. 365, 369 (9 th Cir. BAP 2003)(acknowledging that “post-petition defaults . . . could be cause to
grant relief from the automatic stay if proven by competent evidence or if contested after proper notice.”)(citation
omitted); In re Ellis, 60 B.R. 432, 435 (9 th Cir. BAP 1985)(affirming bankruptcy court’s determination that the
debtor’s failure to make post-petition payments constituted “cause” for lifting the automatic stay); Avila, 311 B.R. at
83 (“It is true that post-petition defaults may constitute cause for relief from stay.”)(citations omitted); In re James
River Associates, 148 B.R. 790, 797 (E.D.Va. 1992)(observing that a continued failure to make post-petition
monthly payments can constitute cause for granting relief from the automatic stay, but that, typically, cause for relief
will exist only when the continuing post-petition default “corresponds with a nonexistent equity cushion.”)(citing In
re Kerns, 111 B.R. 777, 790 (S.D.Ind. 1990)).
3 See In re Webber, 314 B.R. 1, 5 (Bankr.N.D.Okla. 2004)(stating that “under Section 362(d)(1), the moving party
has the burden of going forward with an initial showing of cause.”)(citation omitted)(emphasis in original).
4 See 11 U.S.C. § 362(g)(2). See also, Webber, 314 B.R. at 5 (“If the If the movant satisfies its initial burden of
showing cause, the burden shifts to the debtor to produce evidence that the creditor's collateral is not declining in
value or that the creditor is adequately protected either through payments, an equity cushion, additional or
replacement liens, or good prospects for a successful reorganization.”)(citation omitted).
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remain in place pending further order of the Court, conditioned upon the Debtors making regular
monthly payments of principal and interest in the amount of $279.69 beginning with the payment
due May 1, 2011, and further conditioned upon the Debtors providing access to the Property for
inspection by an agent for EverHome and an agent for American Security Insurance Company.
To protect EverHome’s insured interest in the Property and any insurance proceeds, and to assess
and document the extent of the damage, access to the Property is required despite the Debtors’
assertion that the Lender Policy’s retroactive effective date is invalid because the issue date of
the Policy is a date after the loss occurred.
In conditioning the automatic stay in this fashion, the Court recognizes that the payments
are not equal to the monthly payments that would otherwise be due under the terms of the Note
and Mortgage, which provides for an insurance and property tax component.5 However, any
plan that the Debtors propose in this Chapter 13 case remains subject to the requirements of 11
U.S.C. §1322(b).6
WHEREFORE, IT IS HEREBY ORDERED that the Motion for Relief from Stay is
DENIED, conditioned as follows:
1. 	The Debtors shall begin making monthly payments to EverHome of $279.69,
representing principal and interest due under the Note and Mortgage, on or before
May 1, 2011, and on or before the first day of each month thereafter.
2. 	Debtors shall send the monthly payments due under the terms of this Order to:
EverHome
Attn: 	Default Cash
8100 Nations Way
Jacksonville, Florida 32256
5 Because coverage under the Hartford Policy ended in September of 2010, the amount of the insurance portion of
the monthly payment due under the Note and Mortgage is not clear.
6Under 11 U.S.C. § 1322(b)(2) a debtor may not confirm a plan that modifies the rights of a creditor with a claim
that is secured only by the debtor’s principal residence, except as provided by 11 U.S.C. § 1322(b)(5), 11 U.S.C. §
1322(c), or 11 U.S.C. §1322(e). For secured claims for which the last payment is due after the plan completion date,
a plan must provide that the debtor will maintain the regular post-petition payments during the pendency of the
Chapter 13 case. 11 U.S.C. §1322(b)(5).
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3. 	EverHome shall credit the monthly payments made under the terms of this Order to
principal and interest due under the Note and Mortgage.
4. 	EverHome shall give Debtors a 14-day written notice to cure any payment not timely
made in accordance with this Order. The 14-day cure period shall begin on the date
that the notice is mailed by first class United States mail, postage prepaid, addressed
to:
Lari Graham Bollinger
Pam Kay Bollinger
1610 South Globe Avenue
Portales, NM 88130
or to such other address requested by the Debtors in a writing mailed to Timothy J
Murphy, Little & Dranttel, PC, 7430 Washington Street NE, Albuquerque, NM 87109
and filed of record in this bankruptcy case.
5. 	The Debtors shall make the Property available for inspection during customary
business hours by a representative of EverHome within three days of receipt of
written request.
6. 	The Debtors shall make the Property available for inspection by a representative from
American Security Insurance Company within three days of receipt of written
request.
7. 	Should the Debtors fail to comply with the conditions set forth in this Order, either by
failing to timely cure a late payment or by failing to make the Property available for
inspection, EverHome may file an Affidavit of Default accompanied by a request for
hearing on whether to grant relief from the automatic stay based on a failure to
comply with the terms of this Order.
ORDERED FINALLY, that the Court will consider the stay relief issue further after the extent of
any award of insurance proceeds is determined as a result of the damage to the Property and its
contents.
______________________________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: 	April 12, 2011
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COPY TO:
Lari Graham Bollinger 	Timothy J. Murphy
Pam Kay Bollinger 	Attorney for EverHome
1610 South Globe Avenue 	7430 Washington Street, NE
Portales, NM 88130 	Albuquerque, NM 87109
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