§ 59.1     In General
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 59.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

One stated intent of the creditor coalition that drafted BAPCPA was to stop the “revolving door” of bankruptcy that permitted repeat and serial filings by consumer debtors. When Congress attacked this same issue in 1984, § 109(g) was the result: limits on eligibility for individual debtors when a prior bankruptcy case was dismissed within the preceding 180 days.1 Under § 109(g)(1), a willful failure to abide by a court order or to appear in proper prosecution of a bankruptcy case triggers the 180-day bar to eligibility.2 Under § 109(g)(2), voluntary dismissal after a request for relief from the stay bars refiling for 180 days.3

[2]

BAPCPA took a different approach to repeat filings: limit the automatic stay in the most recent case. The centerpiece of this strategy is new § 362(c)(3) and (c)(4).4 These new subsections are intricate. Grossly simplified: one prior bankruptcy case dismissed within a year—the debtor gets a 30-day stay that can be extended by proving good faith; more than one prior case dismissed within a year—no automatic stay unless the debtor proves good faith. Of course, the devil is in the details.

[3]

Counsel first has to determine whether § 362(c)(3) or (c)(4) applies when the debtor refiles within one year of one or more prior “pending . . . but . . . dismissed” bankruptcy cases.5 Joint debtors must be analyzed separately.6 There is disagreement whether a prior case dismissed because of a prepetition briefing failure under § 109(h) counts for § 362(c)(3) and (c)(4) purposes.7

[4]

If § 362(c)(3) is applicable, then there is the question: Which automatic stays terminate 30 days after the petition? There is fractured case law whether and what prepetition “actions” are predicate to termination of some or all of the automatic stay.8 Odd wording in § 362(c)(3) has produced robust debate whether property of the estate remains protected by the stay notwithstanding termination of other parts of the stay.9

[5]

Procedural issues abound when a refiling debtor collides with § 362(c)(3). Continuation of the automatic stay beyond 30 days after the petition requires notice and a hearing “completed” before expiration of the 30-day period.10 Negotiating the completion of a hearing within that 30-day period with proper notice and opportunity to object can be a daunting undertaking.11 Debtors who fail to extend the 30-day stay under § 362(c)(3)(B) have asserted § 105(a) and other platforms for continuation or reimposition of a stay.12

[6]

Extension of the stay beyond 30 days when § 362(c)(3) applies requires proof that the current case is filed “in good faith as to the creditors to be stayed.”13 Under some circumstances, there is a rebuttable presumption that the current case is not filed in good faith.14 The presumption can be rebutted by clear and convincing evidence of good faith.15 The courts are struggling to fill the void in the statute with respect to the meaning of good faith in this context.16

[7]

When § 362(c)(4) applies—two or more prior cases were pending and dismissed within the year17—then the entire § 362(a) stay does not arise except upon court order after a request. That request to impose a stay must be filed within 30 days of the petition.18 When § 362(c)(4) is applicable, imposing a stay requires proof of good faith as to creditors to be stayed.19 There is a rebuttable presumption that good faith is lacking in § 362(c)(4)(D) that is not identical to the rebuttable presumption that may apply when § 362(c)(3) is in play. Clear and convincing evidence of good faith is required to overcome the presumption when imposition of a stay is litigated under § 362(c)(4)(D).20

[8]

Section 362(c)(3) and (c)(4) are important in Chapter 13 practice. It is not uncommon for Chapter 13 cases to fail for reasons that resolve soon after dismissal. Chapter 13 debtors lose jobs. They get sick. They have accidents at work and sometimes fall out of grace for reasons that are very forgivable. Chapter 7 cases are sometimes dismissed by debtors who mistakenly believe they can manage their debt problems without bankruptcy. Section 362(c)(3) or (c)(4) is implicated anytime a Chapter 13 debtor refiles within a year of one or more prior dismissals. Debtors’ counsel must move quickly and decisively to extend the 30-day stay in § 362(c)(3) or to impose a stay in the first instance under § 362(c)(4), else creditor collection action is likely to destroy the refiled case.

[9]

Moving quickly deserves emphasis. First-day motions, like those filed in Chapter 11 cases, are perhaps a good model. Chapter 13 debtors should file with the petition a motion under § 362(c)(3)21 or (c)(4)22 as appropriate when there has been one or more prior cases that were dismissed within a year. Waiting into the 30-day period is foolish and dangerous because the hearing must be completed before expiration of 30 days after the petition for purposes of § 362(c)(3)(B)23 and a motion to impose a stay is untimely after 30 days after the petition under § 362(c)(4)(B).24 Getting court time will be a problem on the short notice required by these sections. Don’t delay.

[10]

One issue that generated little attention was the question whether the stay termination and extermination provisions in § 362(c)(3) and (c)(4) apply when the prior case(s) was filed and/or dismissed under pre-BAPCPA law. New § 362(c)(3) and (c)(4) make no distinction between prior cases that were filed and/or dismissed before or after BAPCPA. The effective-date provisions of BAPCPA applied § 362(c)(3) and (c)(4) only to refilings after October 17, 2005, but that rule did not reveal whether the one-year look-back includes pre-BAPCPA cases.

[11]

There was no obvious constitutional reason why a limit on the automatic stay could not be based on pre-effective-date events. The automatic stay is perhaps less in the nature of a protected “right” than discharge, and the discharge cases do not support the argument that an individual has a protected interest in an automatic stay in a subsequent bankruptcy case at dismissal of a prior case.25 This was not a very promising issue for debtors, and it evaporated on October 17, 2006.


 

1  See § 21.1 [ 180-Day Bar to Eligibility in 11 U.S.C. § 109(g)—In General ] § 25.1  180-Day Bar to Eligibility in 11 U.S.C. § 109(g)—In General.

 

2  See § 22.1 [ 11 U.S.C. § 109(g)(1)—Willful Failure to Abide by Court Order or to Appear in Proper Prosecution ] § 25.2  11 U.S.C. § 109(g)(1)—Willful Failure to Abide by Court Order or to Appear in Proper Prosecution.

 

3  See § 23.1 [ 11 U.S.C. § 109(g)(2)—Voluntary Dismissal after Request for Relief from Stay ] § 25.3  11 U.S.C. § 109(g)(2)—Voluntary Dismissal after Request for Relief from Stay.

 

4  11 U.S.C. § 362(c)(3) and (c)(4) provide:

(c) Except as provided in subsections (d), (e), (f), and (h) of this section—

 

  
* * * *
 

 

 

(3) if a single or joint case is filed by or against 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)—
(A) the stay under subsection (a) with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case;
(B) on the motion of a party in interest for continuation of the automatic stay and upon notice and a hearing, the court may extend the stay in particular cases as to any or all creditors (subject to such conditions or limitations as the court may then impose) after notice and a hearing completed before the expiration of the 30-day period only if the party in interest demonstrates that the filing of the later case is in good faith as to the creditors to be stayed; and
(C) for purposes of subparagraph (B), a case is presumptively filed not in good faith (but such presumption may be rebutted by clear and convincing evidence to the contrary)—
(i) as to all creditors, if—
(I) more than 1 previous case under any of chapters 7, 11, and 13 in which the individual was a debtor was pending within the preceding 1-year period;
(II) a previous case under any of chapters 7, 11, and 13 in which the individual was a debtor was dismissed within such 1-year period, after the debtor failed to—
(aa) file or amend the petition or other documents as required by this title or the court without substantial excuse (but mere inadvertence or negligence shall not be a substantial excuse unless the dismissal was caused by the negligence of the debtor’s attorney);
(bb) provide adequate protection as ordered by the court; or
(cc) perform the terms of a plan confirmed by the court; or
(III) there has not been a substantial change in the financial or personal affairs of the debtor since the dismissal of the next most previous case under chapter 7, 11, or 13 or any other reason to conclude that the later case will be concluded—
(aa) if a case under chapter 7, with a discharge; or
(bb) if a case under chapter 11 or 13, with a confirmed plan that will be fully performed; and
(ii) as to any creditor that commenced an action under subsection (d) in a previous case in which the individual was a debtor if, as of the date of dismissal of such case, that action was still pending or had been resolved by terminating, conditioning, or limiting the stay as to actions of such creditor; and
(4)(A)(i) if a single or joint case is filed by or against a debtor who is an individual under this title, and if 2 or more single or joint cases of the debtor were pending within the previous year but were dismissed, other than a case refiled under section 707(b), the stay under subsection (a) shall not go into effect upon the filing of the later case; and
(ii) on request of a party in interest, the court shall promptly enter an order confirming that no stay is in effect;
(B) if, within 30 days after the filing of the later case, a party in interest requests the court may order the stay to take effect in the case as to any or all creditors (subject to such conditions or limitations as the court may impose), after notice and a hearing, only if the party in interest demonstrates that the filing of the later case is in good faith as to the creditors to be stayed;
(C) a stay imposed under subparagraph (B) shall be effective on the date of the entry of the order allowing the stay to go into effect; and
(D) for purposes of subparagraph (B), a case is presumptively filed not in good faith (but such presumption may be rebutted by clear and convincing evidence to the contrary)—
(i) as to all creditors if—
(I) 2 or more previous cases under this title in which the individual was a debtor were pending within the 1-year period;
(II) a previous case under this title in which the individual was a debtor was dismissed within the time period stated in this paragraph after the debtor failed to file or amend the petition or other documents as required by this title or the court without substantial excuse (but mere inadvertence or negligence shall not be substantial excuse unless the dismissal was caused by the negligence of the debtor’s attorney), failed to provide adequate protection as ordered by the court, or failed to perform the terms of a plan confirmed by the court; or
(III) there has not been a substantial change in the financial or personal affairs of the debtor since the dismissal of the next most previous case under this title, or any other reason to conclude that the later case will not be concluded, if a case under chapter 7, with a discharge, and if a case under chapter 11 or 13, with a confirmed plan that will be fully performed; or
(ii) as to any creditor that commenced an action under subsection (d) in a previous case in which the individual was a debtor if, as of the date of dismissal of such case, such action was still pending or had been resolved by terminating, conditioning, or limiting the stay as to such action of such creditor.

 

5  11 U.S.C. § 362(c)(3) and (c)(4), discussed in §§ 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply? and 433.1 [ When Does § 362(c)(4) Apply? ] § 61.1  When Does § 362(c)(4) Apply?.

 

6  See §§ 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply? and 433.1 [ When Does § 362(c)(4) Apply? ] § 61.1  When Does § 362(c)(4) Apply?.

 

7  See § 9.5  Consequences of Ineligibility: Jurisdiction; Automatic Stay; Strike, Dismiss or Excuse?, § 60.1  When Does § 362(c)(3) Apply? and § 61.1  When Does § 362(c)(4) Apply?.

 

8  See § 432.2 [ Which Stays Terminate? ] § 60.2  Which Stays Terminate?.

 

9  See § 432.2 [ Which Stays Terminate? ] § 60.2  Which Stays Terminate?.

 

10  11 U.S.C. §  362(c)(3)(B), discussed in § 432.3 [ Timing, Procedure and Form for Extension of Stay ] § 60.3  Timing, Procedure and Form for Extension of Stay.

 

11  See § 432.3 [ Timing, Procedure and Form for Extension of Stay ] § 60.3  Timing, Procedure and Form for Extension of Stay.

 

12  See § 432.3 [ Timing, Procedure and Form for Extension of Stay ] § 60.3  Timing, Procedure and Form for Extension of Stay.

 

13  11 U.S.C. § 362(c)(3)(B), discussed in §§ 432.4 [ (Rebuttable) Presumption of Lack of Good Faith ] § 60.4  (Rebuttable) Presumption of Lack of Good Faith and 432.5 [ Proof of Good Faith ] § 60.5  Proof of Good Faith.

 

14  11 U.S.C. § 362(c)(3)(C), discussed in § 432.4 [ (Rebuttable) Presumption of Lack of Good Faith ] § 60.4  (Rebuttable) Presumption of Lack of Good Faith.

 

15  11 U.S.C. § 362(c)(3)(C), discussed in § 432.4 [ (Rebuttable) Presumption of Lack of Good Faith ] § 60.4  (Rebuttable) Presumption of Lack of Good Faith.

 

16  See § 434.2 [ Proof of Good Faith ] § 61.4  Proof of Good Faith.

 

17  See § 433.1 [ When Does § 362(c)(4) Apply? ] § 61.1  When Does § 362(c)(4) Apply?.

 

18  11 U.S.C. § 362(c)(4)(B), discussed in § 433.2 [ Procedure, Timing and Form for Imposing Stay ] § 61.2  Procedure, Timing and Form for Imposing Stay.

 

19  11 U.S.C. § 362(c)(4)(B), discussed in §§ 434.1 [ (Rebuttable) Presumption of Lack of Good Faith ] § 61.3  (Rebuttable) Presumption of Lack of Good Faith and 434.2 [ Proof of Good Faith ] § 61.4  Proof of Good Faith.

 

20  See § 434.2 [ Proof of Good Faith ] § 61.4  Proof of Good Faith.

 

21  See § 432.3 [ Timing, Procedure and Form for Extension of Stay ] § 60.3  Timing, Procedure and Form for Extension of Stay.

 

22  See § 433.2 [ Procedure, Timing and Form for Imposing Stay ] § 61.2  Procedure, Timing and Form for Imposing Stay.

 

23  See § 432.3 [ Timing, Procedure and Form for Extension of Stay ] § 60.3  Timing, Procedure and Form for Extension of Stay.

 

24  See § 433.2 [ Procedure, Timing and Form for Imposing Stay ] § 61.2  Procedure, Timing and Form for Imposing Stay.

 

25  See § 346.1 [ Student Loans ] § 158.2  Student Loans for discussion of analogous questions with respect to discharge.