Transcript:
Argument of Speaker
Mr. Speaker: The opinion of the Court in No. 86-1602, United Savings Association of Texas versus Timbers of Inwood will be announced by Justice Scalia.
Argument of Justice Scalia
Mr. Scalia: This case is before us on a petition for writ of certiorari to the Fifth Circuit.
Petitioner is an undersecured creditor of the respondent who is a debtor undergoing reorganization in bankruptcy.
Section 362(d)(1) of the Bankruptcy Code provides an automatic stay of actions against the debtor or property of the State which among other things prevents a secured creditor from foreclosing on his collateral.
The Code provides however that the court can provide relief from the stay when there is, in the words of the Code, "lack of adequate protection" for the secured parties property interest.
Petitioner in this case sought relief from the automatic stay under this provision in the form of monthly interest payments asserting that because of the stay he could not foreclose on the collateral and since he could not foreclose on the collateral he was deprived of the interest that he would be receiving on the collateral.
In the opinion announced today, we affirm the Fifth Circuit and hold that the right of undersecured creditor to adequate protection of its interest in property under 362(d)(1) does not entitle it to compensation for the delay caused by the automatic stay in foreclosing on collateral.
As is more fully explained in the opinion, we reach this conclusion because the contrary interpretation is inconsistent with other provisions of the Bankruptcy Code that define the rights of secured creditors in bankruptcy.
Our decision will not leave undersecured creditors open to inordinate and extortionate delay in bankruptcy.
Since under one of the other provisions of the Code 362(d)(2) an undersecured creditor is entitled to relief from the automatic stay if the debtor does not show that there is a reasonable possibility of a successful reorganization within a reasonable time.
The Court's opinion is unanimous.
