§ 153.2     Consequences of Dismissal Added or Changed by BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 153.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

BAPCPA made no material changes to the effects of dismissal in § 349.1 Section 109(g)—defining the eligibility consequences when an individual debtor refiles a Chapter 13 case within 180 days of the dismissal of a prior case—was also untouched by BAPCPA.2

[2]

But changes by BAPCPA to the automatic stay in § 362 may be characterized as new consequences of dismissal. BAPCPA added new subparagraphs (3) and (4) to § 362(c) to limit the automatic stay when the debtor was a debtor in one or more prior bankruptcy cases pending within the preceding year that were dismissed.3 These new limitations on the automatic stay are not specific to dismissal of a prior Chapter 13 case but must be reckoned with whenever a Chapter 13 debtor contemplates or faces dismissal after BAPCPA.

[3]

Somewhat simplified, when a Chapter 13 case is dismissed—whether voluntarily or on the motion of a party in interest—the dismissal triggers a limitation on the automatic stay under new § 362(c)(3) and/or (4) for one year. If one dismissed case was pending within the year preceding the current petition, the automatic stay under § 362(a) of any “action taken” with respect to a debt or property securing a debt or with respect to any lease “shall terminate with respect to the debtor” on the 30th day after the filing of the current case.4 If two or more cases of the debtor were pending within the previous year but were dismissed, then no stay goes into effect in the current case except on request of a party in interest and after a court hearing.5

[4]

The stay that terminates in 30 days under new § 362(c)(3) is not the entire automatic stay, but only the stay of “action taken” by a creditor and only with respect to the debtor, not property of the estate.6 These are significant limitations on the impact of this new stay termination given the expanded definition of estate property in a Chapter 13 case.7

[5]

There are confusing conditions in new § 362(c)(3) and (c)(4) with respect to § 707(b). Under new § 362(c)(3), the dismissal of one prior case during the preceding year terminates parts of the automatic stay after 30 days:

(3) if a single or joint case is filed by or against [a] debtor who is an individual in a case under chapter 7, 11, or 13, and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed, other than a case refiled under a chapter other than chapter 7 after dismissal under section 707(b).8
[6]

The italicized phrase could modify the current case or it could modify the case that was pending within the preceding year but dismissed. Perhaps the favored interpretation would be that the automatic stay is not limited to 30 days in the current case if the case that was dismissed within the preceding year was a case refiled under a chapter other than Chapter 7 after dismissal under § 707(b)—this being the reading if the third phrase modifies its closest antecedent phrase. But it is also possible to read the “other than” phrase as a limitation on the current case: if the current case was refiled under a chapter other than Chapter 7, after dismissal of a prior case under § 707(b), then the dismissal of the prior case within a year does not limit the automatic stay in the current case. This poorly constructed new section is likely to give rise to cases supporting both interpretations.

[7]

Under new § 362(c)(4), no stay under § 362(a) goes into effect if two or more cases of the debtor were pending within the previous year but were dismissed, “other than a case refiled under § 707(b).”9 This condition with respect to § 707(b) is worded differently than in § 362(c)(3) and, if anything, is more difficult to comprehend. There is no such thing as a case “refiled under § 707(b).” Perhaps this means that in a string of Chapter 7 and Chapter 13 cases by an individual debtor, each case “refiled” after a dismissal for abuse under § 707(b) is not counted for § 362(c)(4) purposes. This is difficult to penetrate.

[8]

The message for Chapter 13 debtors is that dismissal of a Chapter 13 case may have the consequence that there will be limitations on the automatic stay in any bankruptcy case filed within a year.

[9]

Dismissal of a Chapter 13 case before a plan is confirmed creates many of the same considerations as conversion with respect to money held by the trustee.10 Payments by the debtor to the trustee between the filing of a Chapter 13 case and confirmation are retained by the trustee, unless the bankruptcy court orders otherwise.11 If no plan is confirmed, § 1326(a)(2) directs: “the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to [§ 1326(a)(3)] to the debtor, after deducting any unpaid claim allowed under section 503(b).12

[10]

Section 503(b), of course, defines administrative expenses. The cross-reference to § 1326(a)(3) captures the possibility that the bankruptcy court has entered an order that modifies, increases or reduces “payments required under this subsection pending confirmation of a plan.”13 There are new subsections of § 1326(a)(1) which require preconfirmation payments to lessors of personal property and to allowed purchase-money-secured creditors.14 New § 1326(a)(2) awkwardly says that at dismissal before confirmation, the trustee must return to the debtor all payments from the debtor, net of administrative expenses, so long as the payments from the debtor are “not previously paid” and “not yet due and owing” to creditors pursuant to a court order that modifies, increases or reduces the payments required by § 1326(a)(1)(B) or (C) to a lessor of personal property or to the holder of an allowed purchase-money-secured claim.

[11]

These conditions are strange. Of course, the Chapter 13 trustee will not retain any payment from the debtor that has been “previously paid” to a creditor pursuant to a court order described in § 1326(a)(3). Court orders under § 1326(a)(3) are likely to be rare in Chapter 13 cases because of the accelerated hearing on confirmation required by § 1324, as amended by BAPCPA.15 As worded, new § 1326(a)(2) does not interrupt the return to the debtor of any payment to the trustee when the debtor is delinquent in payments to a lessor of personal property or to an allowed purchase-money- secured creditor under § 1326(a)(1)(B) or (C) but there is no court order under § 1326(a)(3).

[12]

Prior to BAPCPA, it was increasingly common for bankruptcy courts to impose nonstatutory conditions and restrictions at dismissal of a Chapter 13 case.16 Typically, the courts were inspired to impose special conditions and restrictions at dismissal when the debtor was a serial filer or there was evidence that abusive prior or future bankruptcy filings were likely.17

[13]

BAPCPA did not amend the provisions of the Bankruptcy Code typically cited by the courts in support of the power to impose conditions and restrictions on dismissal of a Chapter 13 case.18 But a BAPCPA amendment to § 362 may impact one class of nonstatutory conditions sometimes imposed by the courts at dismissal of Chapter 13 cases before BAPCPA.

[14]

Under new § 362(b)(20) and (d)(4), bankruptcy courts can order that a future bankruptcy filing by the debtor will not operate as an automatic stay with respect to an act against real property for a period as long as two years.19 The conditions on such an order are intricately defined by new § 362(d)(4).20 The section is mentioned here because this new provision may serve to limit the inclination of the bankruptcy courts to impose different or contrary conditions and restrictions on the automatic stay at dismissal of a Chapter 13 case. Now that the Bankruptcy Code specifically defines the circumstances under which it is permissible to order a limitation on the automatic stay in a future bankruptcy case, it is arguably inappropriate for the bankruptcy court to condition dismissal of a Chapter 13 case in a manner that is inconsistent with new § 362(b)(20) and (d)(4).

[15]

It has to be said that the statutory restrictions on refiling in § 109(g) have hardly dissuaded the bankruptcy courts from entering inconsistent conditions and restrictions at dismissal of Chapter 13 cases.21 It is perhaps too much to hope that the “in rem” stay relief codified in new § 362(b)(20) and (d)(4) will have any different effect on the inclinations of some courts to impose creative nonstatutory conditions and restrictions at dismissal of a Chapter 13 case.


 

1  See 11 U.S.C. § 349, discussed in § 338.1 [ In General ] § 153.1  In General.

 

2  See 11 U.S.C. § 109(g), discussed beginning at § 25.1  180-Day Bar to Eligibility in 11 U.S.C. § 109(g)—In General.

 

3  11 U.S.C. § 362(c)(3) and (4), discussed in § 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply?.

 

4  11 U.S.C. § 362(c)(3)(A), discussed in § 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply?.

 

5  See 11 U.S.C. § 362(c)(4), discussed in § 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply?.

 

6  See 11 U.S.C. § 362(c)(3), discussed in § 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply?.

 

7  See 11 U.S.C. § 1306, discussed beginning at § 46.1  What Is Property of the Chapter 13 Estate?

 

8  11 U.S.C. § 362(c)(3) (emphasis added), discussed further in § 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply?.

 

9  11 U.S.C. § 362(c)(4), discussed further in § 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply?.

 

10  See § 534.1 [ Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) ] § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA.

 

11  See 11 U.S.C. § 1326(a)(1) and (2), discussed in §§ 402.1 [ Disposition of Preconfirmation Payments ] § 44.7  Disposition of Preconfirmation Payments after BAPCPA and 534.1 [ Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) ] § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA.

 

12  11 U.S.C. § 1326(a)(2), discussed in §§ 401.1 [ Preconfirmation Payments ] § 44.6  Preconfirmation Payments after BAPCPA and 402.1 [ Disposition of Preconfirmation Payments ] § 44.7  Disposition of Preconfirmation Payments after BAPCPA.

 

13  11 U.S.C. § 1326(a)(3), discussed in §§ 401.1 [ Preconfirmation Payments ] § 44.6  Preconfirmation Payments after BAPCPA, 402.1 [ Disposition of Preconfirmation Payments ] § 44.7  Disposition of Preconfirmation Payments after BAPCPA and 534.1 [ Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) ] § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA.

 

14  See 11 U.S.C. § 1326(a)(1)(B) and (C), discussed in §§ 401.1 [ Preconfirmation Payments ] § 44.6  Preconfirmation Payments after BAPCPA, 426.1 [ Adequate Protection Rights before Confirmation ] § 57.3  Preconfirmation Adequate Protection Rights after BAPCPA and 427.1 [ Preconfirmation Rights of Landlords and Lessors ] § 57.4  Preconfirmation Rights of Landlords and Lessors after BAPCPA.

 

15  See 11 U.S.C. § 1324, discussed in §§ 402.1 [ Disposition of Preconfirmation Payments ] § 44.7  Disposition of Preconfirmation Payments after BAPCPA and 502.1 [ Timing of Hearing on Confirmation ] § 115.2  Timing of Hearing on Confirmation after BAPCPA.

 

16  See § 339.1 [ Court-Imposed Conditions and Restrictions on Dismissal ] § 153.3  Court-Imposed Conditions and Restrictions on Dismissal.

 

17  Id.

 

18  See 11 U.S.C. §§ 105(a) and 349(a), discussed in § 339.1 [ Court-Imposed Conditions and Restrictions on Dismissal ] § 153.3  Court-Imposed Conditions and Restrictions on Dismissal.

 

19  See § 431.1 [ Real Estate, Landlord and In Rem Exceptions ] § 58.9  Real Estate, Landlord and In Rem Exceptions after BAPCPA.

 

20  11 U.S.C. § 362(d)(4) is discussed in § 431.1 [ Real Estate, Landlord and In Rem Exceptions ] § 58.9  Real Estate, Landlord and In Rem Exceptions after BAPCPA. 11 U.S.C. § 362(d)(4) provide:

(4) with respect to a stay of an act against real property under subsection (a), by a creditor whose claim is secured by an interest in such real property, if the court finds that the filing of the petition was part of a scheme to delay, hinder, and defraud creditors that involved either—
(A) transfer of all or part ownership of, or other interest in, such real property without the consent of the secured creditor or court approval; or
(B) multiple bankruptcy filings affecting such real property.
If recorded in compliance with applicable State laws governing notices of interests or liens in real property, an order entered under paragraph (4) shall be binding in any other case under this title purporting to affect such real property filed not later than 2 years after the date of the entry of such order by the court, except that a debtor in a subsequent case under this title may move for relief from such order based upon changed circumstances or for good cause shown, after notice and a hearing. Any Federal, State, or local governmental unit that accepts notices of interests or liens in real property shall accept any certified copy of an order described in this subsection for indexing and recording.

 

21  See §§ 20.1 [ Court-Imposed Restrictions on Eligibility to Refile ] § 24.1  Court-Imposed Restrictions on Eligibility to Refile and 339.1 [ Court-Imposed Conditions and Restrictions on Dismissal ] § 153.3  Court-Imposed Conditions and Restrictions on Dismissal.