## Facts

- Ronald E. Littlefield filed a personal-injury action against Charles Holtkamp and Holtkamp Farms, Inc. in 1979, set for trial in May 1980.
- Five days before trial, Holtkamp filed voluntary Chapter XI petitions, listing Littlefield’s claim as an unsecured debt; the filing triggered an automatic stay of the tort case under 11 U.S.C. § 362(a).
- Littlefield commenced an adversary proceeding in bankruptcy court and sought emergency relief from the stay; Holtkamp received about three hours’ notice of the hearing.
- The bankruptcy court modified the stay to allow the tort case to proceed to judgment, but barred Littlefield from collecting any resulting judgment from Holtkamp or the bankruptcy estate.
- After trial, a jury entered a $5,025,000 personal-injury judgment for Littlefield.
- Holtkamp appealed only the stay-modification order.

## Issues

1. Whether the bankruptcy court abused its discretion under 11 U.S.C. § 362(d) by lifting the automatic stay “for cause” to permit the pending personal-injury action to proceed to judgment while prohibiting collection against the debtor or estate.
2. Whether the emergency hearing procedures (short notice, evidentiary rulings, and the absence of detailed findings and conclusions) required reversal on due process or procedural grounds.

## Decision

- The Seventh Circuit affirmed the bankruptcy court’s order modifying the automatic stay.
- The court held that relief from the stay under § 362(d) is committed to the bankruptcy judge’s discretion and is reversible only for abuse of discretion.
- The court found adequate “cause” to allow the personal-injury case—already ready for trial—to proceed to judgment, particularly because the debtor’s insurer would provide the defense and bear any liability.
- The court rejected challenges based on the emergency nature of the hearing, concluding that any procedural deficiencies did not warrant reversal and that the basis for the order was sufficiently apparent from the record.

## Legal Principles

- The automatic stay under 11 U.S.C. § 362(a) is not absolute; a bankruptcy court may grant relief from the stay “for cause” under § 362(d).
- A bankruptcy court may find “cause” to allow prepetition litigation to continue to judgment when doing so helps liquidate a claim for bankruptcy administration and does not materially burden the estate, including where insurance covers defense costs and payment.
- Orders granting or denying stay relief under § 362(d) are reviewed for abuse of discretion, with substantial deference to the bankruptcy court’s case-specific assessment.
- Emergency procedures and limited notice do not require reversal absent a showing of prejudicial error in the stay-relief decision.

## Conclusion

The Seventh Circuit upheld the bankruptcy court’s discretionary stay relief allowing a near-trial personal-injury action to proceed to judgment, emphasizing that insurance-funded defense and payment, coupled with a bar on collection from the debtor or estate, supported a finding of “cause” and avoided undue impact on the bankruptcy process.


In re Holtkamp, 669 F.2d 505 (7th Cir. 1982)