Cite as: Keith M. Lundin, Lundin On Chapter 13, § 60.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
In Chapter 13 cases filed after October 17, 2005, some debtors with prior bankruptcy experience within a year face termination of some aspects of the automatic stay 30 days after the petition under § 362(c)(3). The stay that terminates in 30 days is not the entire automatic stay,1 and the conditions that trigger the 30-day stay termination are narrowly described in § 362(c)(3)(A):
(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[.]2
The first sentence of § 362(c)(3) is an English teacher’s nightmare. The sentence begins, “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, . . . .” The sentence could be read to apply only in cases filed by or against an individual who is already a debtor in a case under Chapter 7, 11 or 13. Read this way, § 362(c)(3) requires a three-case scenario: one case that was pending and dismissed within a year; one case that is still pending when the current petition was filed; and a third case in which § 362(c)(3) is now at issue. Courts that have confronted this strange first sentence have reconstructed the words to read: “If a single or joint case is filed under chapter 7, 11, or 13 by or against an individual . . . .”3 Other constructions are possible but less plausible.
Under § 362(c)(3), the automatic stay in § 362(a) with respect to any action taken with respect to debt, property securing debt and leases terminates with respect to4 the debtor 30 days after a bankruptcy filing under Chapter 7, 11 or 135 if the debtor had a case pending within the preceding year that was dismissed.6 This 30-day stay termination does not apply if “a case” was “refiled under a chapter other than chapter 7 after dismissal under section 707(b).”7 The sentence is not clear whether this is the prior case or the current case—opening the possibility that there have been three cases in this string, either the second or third of which was filed after dismissal under § 707(b).8
The exception to termination of the automatic stay when the current case was refiled under a chapter other than Chapter 7 after a dismissal under § 707(b) is interesting. Recall that dismissal under § 707(b) typically will be for “abuse” of the provisions of Chapter 7. By one interpretation, a case refiled under Chapter 13 after dismissal of a Chapter 7 case for abuse under § 707(b) would not be subject to the 30-day stay termination in § 362(c)(3). In contrast, refiling a Chapter 13 case within a year of a prior Chapter 13 case that failed when the debtor was injured at work would trigger stay termination under new § 362(c)(3). Being booted out of Chapter 7 for abuse is okay under BAPCPA; trying and failing in a Chapter 13 case is punishable by truncation of the automatic stay on the 30th day of a second attempt at paying creditors. This is a perverse sense of punishments and entitlements.
The 30-day stay termination in § 362(c)(3) only applies when a prior case was both “pending” and “dismissed” during the year preceding the petition. A Chapter 7 case in which the debtor received a discharge might be a case “pending” within a year, but because it was not dismissed, it does not count for § 362(c)(3) purposes.9 The conjunctive conditions—pending and dismissed—have produced counting issues when a prior case was ordered dismissed but is still “pending” because not yet closed by the bankruptcy clerk. Courts addressing this issue have unanimously concluded that a case is pending for § 362(c)(3) purposes until an order of dismissal is entered and closing is irrelevant.10
The phrase “a single or joint case of the debtor” in § 362(c)(3) signals that married debtors must be considered for purposes of counting prior cases in § 362(c)(3). Courts have rejected the invitation to aggregate separate filings by spouses to determine whether § 362(c)(3) applies.11 There is evidence in the reported decisions that bankruptcy courts will count carefully to determine whether a prior bankruptcy case was both pending and dismissed within a year for § 362(c)(3) purposes.12
Detailed elsewhere,13 there is disagreement whether a prior bankruptcy case dismissed because the debtor failed to satisfy the prepetition briefing requirement in § 109(h)14 counts as a pending and dismissed case for § 362(c)(3) purposes. Not always by the same logic, a majority of the reported decisions concludes that a petition dismissed for ineligibility under § 109(h) was not a pending and dismissed prior case for § 362(c)(3) purposes.15 The minority position—that dismissal under § 109(h) counts as a prior case in § 362(c)(3) analysis16—is consistent with the view of most courts that the petition or case filed by a § 109(h) ineligible debtor is appropriately dismissed, not stricken.17 This potential consequence of ineligibility puts a premium on careful attention to the § 109(h) prepetition briefing requirement before filing a Chapter 13 case.18
1 See § 432.2 [ Which Stays Terminate? ] § 60.2 Which Stays Terminate?.
2 11 U.S.C. § 362(c)(3)(A).
3 See In re Baldassaro, 338 B.R. 178, 182–84 (Bankr. D.N.H. 2006) (“[T]he language in new § 362(c)(3) is very poorly written. . . . [T]he provisions of § 362(c)(3) [are] neither consistent nor coherent. . . . [T]he section only applies to individuals who have had three cases pending in one calendar year . . . . Because the legislative history clearly reflects congressional intent to limit the duration of the automatic stay in cases similar to [this] Case, the Court shall apply the subsection to this case, notwithstanding the plain language of the statute.”); In re Paschal, 337 B.R. 274, 277–78 (Bankr. E.D.N.C. 2006) (Although worded to the contrary, § 362(c)(3) applies when there has been only one prior filing by the debtor within a year. “Taken all together, [§ 362(c)(3)] only applies to individuals who have had three cases pending in one calendar year: one case that has been dismissed, one case that is still pending when the petition at issue is filed, and the new case that is before the court for determination. . . . Although arguably contrary to the statute’s literal language, the court considers the statute to apply in a situation, such as is presently before the court, in which a debtor files a petition after the dismissal of a prior case that was pending within the preceding one-year period. Otherwise § 362(c)(3)(A) would in effect have no meaning.”).
4 There are actually four “with respect to[s]” in the single sentence fragment that is 11 U.S.C. § 362(c)(3)(A). See § 432.2 [ Which Stays Terminate? ] § 60.2 Which Stays Terminate?.
5 Notice that Chapter 12 is omitted from this.
6 11 U.S.C. § 362(c)(3)(A).
7 11 U.S.C. § 362(c)(3), discussed in § 541.1 [ Consequences of Dismissal ] § 153.2 Consequences of Dismissal Added or Changed by BAPCPA.
8 See § 541.1 [ Consequences of Dismissal ] § 153.2 Consequences of Dismissal Added or Changed by BAPCPA.
9 See In re Lovelace, No. 06-43464, 2007 WL 187733 (Bankr. W.D. Mo. Jan. 16, 2007) (In a Chapter 13 case filed on December 14, 2006, § 362(c)(3) is not applicable when previous Chapter 7 case was filed on May 24, 2005, and discharged on December 26, 2005. “By its terms, § 362(c)(3)(B) is only applicable if the case which was pending during the 1-year period prior to the filing of the current case was dismissed. Here, debtors’ prior case was not dismissed, but instead resulted in a discharge of their obligations. Accordingly, § 362(c)(3)(B) does not apply to these debtors.”).
10 See In re Easthope, No. 06-20366, 2006 WL 851829, at *3 (Bankr. D. Utah Mar. 28, 2006) (unpublished) (For § 362(c) purposes, prior bankruptcy case is “pending” until it is dismissed without regard to when administrative functions are completed and the case is closed. “The plain meaning of the word ‘pending’ as well as policy considerations demonstrate that a case is no longer pending once it has been dismissed.”); In re Moore, 337 B.R. 79, 81 (Bankr. E.D.N.C. 2005) (Prior case was not “pending” within one year of commencement of present Chapter 13 case when prior case was dismissed more than a year before the filing of the present case but was closed by the bankruptcy court within one year of the present case. “Mr. Moore’s prior case was open within the one year preceding the filing of the current case, but it was dismissed prior to the one-year period. . . . [A] case is no longer ‘pending’ once it has been dismissed. . . . [T]he debtor has no control over when the case is closed after dismissal . . . . Mr. Moore’s first case was no longer ‘pending’ for purposes of § 362(c)(3) as of the date of dismissal, regardless of when the case was closed.”).
11 See In re Maxey, No. 06 36773, 2006 WL 3834218 (Bankr. S.D. Tex. Dec. 27, 2006) (Section 362(c)(3) applies but not § 362(c)(4) when, in a chronicle of nine bankruptcy filings by the debtor and her husband, only one prior case by the debtor was pending and dismissed within the previous year; separate filings by spouses are not aggregated for § 362(c)(3) purposes.); In re Parker, 336 B.R. 678, 680–81 (Bankr. S.D.N.Y. 2006) (For § 362(c)(3) and (c)(4) purposes, joint debtors must be analyzed separately. John Parker had four bankruptcy filings, two dismissed within a year of the current joint case. Luisa Parker had three voluntary Chapter 13 cases, none of which was pending or dismissed in the year prior to the current filing. “[A]s to John Parker the automatic stay did not go into effect . . . . However, neither Section 362(c)(3) nor (c)(4) applies to Luisa Parker. . . . [T]he stay as to Luisa Parker is still in effect. . . . [I]n a joint bankruptcy case, the application of Section 362(c)(3) and (4) to each debtor must be analyzed separately.”).
12 See, e.g., In re Maxey, No. 06 36773, 2006 WL 3834218 (Bankr. S.D. Tex. Dec. 27, 2006) (Bankruptcy court sorts through a chronicle of nine bankruptcy filings by the debtor and the debtor’s husband to determine that only one prior case by the debtor was pending and dismissed within the previous year, eliminating separate filings by the debtor’s spouse for § 362(c)(3) purposes.); In re Elliott-Cook, 357 B.R. 811 (Bankr. N.D. Cal. 2006) (Section 362(c)(3) applies because debtor had one prior Chapter 13 case dismissed within a year.); In re Garrett, 357 B.R. 128 (Bankr. C.D. Ill. 2006) (Section 362(c)(3) applies when Chapter 13 case is filed two months after dismissal of prior Chapter 13 case in which relief from stay was granted to mortgage holder.); In re Thomas, No. 352 B.R. 751 (Bankr. D.S.C. 2006) (Although debtor has two prior bankruptcy cases, both dismissed for failure to make payments to trustee, only one prior case was pending within the year preceding the current case, thus § 362(c)(3) applies.).
14 11 U.S.C. § 109(h) is discussed beginning at § 18.1 In General.
15 See In re Maxey, No. 06 36773, 2006 WL 3834218 (Bankr. S.D. Tex. Dec. 27, 2006) (Striking of a prior petition based on § 109(h) ineligibility does not count for § 362(c)(3) purposes.); In re Thompson, 344 B.R. 899, 905–06 (Bankr. S.D. Ind. 2006) (Petition by ineligible debtor triggers automatic stay but does not count toward limitation on stay in § 362(c)(3) or (c)(4). “[T]he ‘filing of a petition’ is not synonymous with ‘the commencement of a case.’ The phrase ‘an entity that may be a debtor under such chapter’ or ‘an individual that may be a debtor under such chapter’ qualifies ‘petition’ and . . . only those petitions filed by those eligible to be debtors ‘under such chapters’ can ‘commence’ a ‘case.’ . . . [W]hen it has been determined that a debtor who files a bankruptcy petition is ineligible under § 109(h) to commence a case under title 11 . . . the petition should be stricken. . . . [Sections] 301, 302, and 303 allow for petitions to be filed by ineligible debtors, they just don’t allow cases to be commenced by petitions filed by ineligible debtors.”); In re Valdez, 335 B.R. 801, 803–04 (Bankr. S.D. Fla. 2005) (Chapter 13 petition dismissed because pro se debtor did not request a § 109(h) briefing and was not eligible will not count as a prior case for purposes of § 362(c)(3) or (4). “Because the petition failed to provide Mirielys Valdez status as a debtor, the Court will not consider this a dismissed case in which the individual was the debtor, for purposes of denying the imposition of the automatic stay in a subsequently filed case pursuant to 11 U.S.C. § 362. Thus, the Court views the criteria established by 11 U.S.C. § 109 as jurisdictional. Should Mirielys Valdez proceed to obtain budget and credit counseling as required under 11 U.S.C. § 109(h)(3), she will then be eligible to become a debtor under 11 U.S.C. § 109 and any petition thereafter filed in a timely manner, within 180 days after completion of the credit counseling services, will be treated as her first petition, not subject to 11 U.S.C. § 362(c)(3) or (c)(4).”).
16 In re Bell, No. 06-11115 EEB, 2006 WL 1132907 (Bankr. D. Colo. Apr. 27, 2006) (unpublished). See also Adams v. Finlay, No. 06 Civ. 6039(CLB), 2006 WL 3240522, at *6 (S.D.N.Y. Nov. 3, 2006) (“[I]t is by no means clear to this Court that striking a Petition as an alternative to dismissal would necessarily be regarded in a future lawsuit as having the apparent benefit to the Debtor which the Bankruptcy Judge in these cases assumes it would have, or that it would exempt the would be Petitioners from the adverse statutory consequences imposed by BAPCPA.”).