§ 60.2     Which Stays Terminate?
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 60.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

In Chapter 13 cases filed after October 17, 2005, some aspects of the automatic stay terminate 30 days after the petition under § 362(c)(3) if the debtor had one pending and dismissed bankruptcy case within a year of the current petition.1 The strange wording of § 362(c)(3) has generated controversy with respect to what parts of the automatic stay terminate 30 days after the petition absent action to extend the stay.

[2]

Section 362(c)(3)(A) describes the stay that terminates in these words: “the stay under [§ 362(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 phrase “with respect to” appears four times in this awkward sentence and in its ordinary use, this phrase limits the phrase that precedes it—“the stay under [§ 362(a)].” In other words, the stay that terminates 30 days after the petition when § 362(c)(3) is applicable is not the entire stay under § 362(a)3 but only so much of the stay in § 362(a) that satisfies the four “with respect to” conditions in § 362(c)(3)(A).

[3]

By the plain meaning route, the stay that terminates in 30 days under § 362(c)(3), only concerns “action taken”—arguably a limitation to action by a creditor that pre-exists the Chapter 13 petition. Perhaps more significantly, the stay terminates only “with respect to the debtor.” The stay of actions with respect to property of the estate is not mentioned in § 362(c)(3) and appears unaffected by any stay termination that occurs 30 days after the petition.

[4]

Limiting stay termination to the debtor and property of the debtor and to creditors that have taken collection action before the petition is not an illogical policy choice in this context. The expanded definition of property of the estate in a Chapter 13 case under § 13064 means that new § 362(c)(3) will not allow chaotic dismantling of a Chapter 13 estate 30 days into a second filing unless the court grants relief from the stay.

[5]

The possibility that termination of the stay “with respect to the debtor” (only) in § 362(c)(3)(A) will be read plainly could be a problem for lienholders in Chapter 13 cases. All the debtor’s property, including postpetition earnings, remains property of the Chapter 13 estate—at least until confirmation, and often for the life of the case.5 Property of the Chapter 13 estate continues to be protected from lien enforcement by § 362(a)(4), notwithstanding that other stays “with respect to the debtor” terminate 30 days after the petition under new § 362(c)(3)(A). Lienholders risk violation of the stay to proceed with lien enforcement based only on stay termination under § 362(c)(3).

[6]

Notice also that the 30-day stay termination in § 362(c)(3) applies only to debt or property or a lease “with respect to the debtor.” If the current case is a joint case and if there is a stay with respect to debt or property or a lease in favor of a joint debtor who was not a debtor in a prior case that was pending and dismissed within a year, then there is an automatic stay in effect for the joint debtor that does not terminate 30 days after the petition.

[7]

Cases interpreting § 362(c)(3) quickly focused on the limiting language in § 362(c)(3)(A). A majority of courts have read “with respect to any action taken” to mean that the stay terminates 30 days after the petition only for a creditor that commenced collection action before the petition—some courts go farther to require that the action taken be a “formal” judicial or equivalent proceeding.6 As explained by the bankruptcy court in In re Paschal:7

If Congress intended for § 362(c)(3)(A) to terminate all provisions of the automatic stay it could have clearly said so, as it did in § 362(c)(4)(A)(i). . . . The term “act” is much broader than the term “action” . . . . [T]he court concludes that the term “action” means a formal action, such as a judicial, administrative, governmental, quasi-judicial, or other essentially formal activity or proceeding. Furthermore, the action with respect to which the stay terminates is an “action taken,” which means an action in the past, prior to the filing of the debtor’s bankruptcy petition. . . . In this case the uncontested evidence is that no actions were taken against the debtor prior to bankruptcy. Accordingly, the court concludes that no protections of the automatic stay are terminated in this case by § 362(c)(3)(A)[.]8
[8]

In contrast, the Bankruptcy Court for the Southern District of Georgia has rejected reading “action taken” to require court action before the second petition as a condition to termination of the stay under § 362(c)(3)(A). As explained in In re James:9

The Court finds that when “action taken” is read in context with the remaining provisions of § 362(c)(3) its application is not limited to creditors that have taken action prior to the pendency of the current case. . . . There is no temporal qualification on “action taken” that limits its application to past action. Section 362(c)(3)(B) provides on motion of a party in interest, if certain criteria are met, the Court may extend the stay as to “any or all creditors,” not just creditors who have previously taken action. . . . [Section] 362(c)(3)(C)(ii) does instill a temporal element . . . . Reviewing “action taken” in context of the entire § 362(c)(3), the Court finds its application is not limited merely to creditors who have taken action prior to the pendency of the current case.10
[9]

A substantial number of courts have found compelling arguments from statutory construction and policy to support the conclusion that § 362(c)(3)(A) does not terminate the stay with respect to property of the Chapter 13 estate. Detailed below,11 the stay that terminates under § 362(c)(3) when the debtor has one pending case dismissed during the previous year is different and narrower than the stay that does not come into effect at all under § 362(c)(4) if there have been two or more cases pending and dismissed during the previous year. This plain difference between two adjacent statutory provisions has been cited by many courts as evidence that § 362(c)(3)(A) does not terminate the stay 30 days after the petition with respect to property of the Chapter 13 estate. As explained by the Bankruptcy Court for the Eastern District of North Carolina in In re Jones:12

Section 362(a) differentiates between acts against the debtor, against property of the debtor and against property of the estate. . . . If Congress had intended that the automatic stay would terminate under § 362(c)(3)(A) as to property of the estate, it would have specifically said so, as it did in § 521(a)(6). . . . [T]he scope of the stay terminated under § 362(c)(3)(A) is different and more limited than the stay termination in § 362(c)(4)(A)(i). . . . [Section] 362(c)(3)(A) terminates the stay with respect to actions taken against the debtor and against property of the debtor, but does not terminate the stay with respect to property of the estate. . . . [T]his interpretation also makes sense from a policy perspective. It is important in chapter 13 cases to protect property of the estate from automatic termination under § 362(c)(3)(A), because estate property may be needed to consummate the debtor’s chapter 13 plan. It is even more important to protect property of the estate in chapter 7 cases . . . . Keeping the stay in place with respect to property of the estate, even in cases where there has been a dismissal in the prior year, is an important protection for creditors.13
[10]

At this writing, only two bankruptcy courts have concluded that § 362(c)(3)(A) terminates the entire § 362(a) stay, and one of those courts has been reversed on appeal. The Bankruptcy Court for the District of South Carolina in In re Jupiter14 deconstructed § 362(c)(3)(A) to find that Congress intended the stay to terminate in 30 days with respect to all property of the Chapter 13 estate:

To the extent that § 362(c)(3)(A) is unambiguous, the Court disagrees with the construction of this section that allows the stay to continue with respect to property of the estate. . . . [T]he operative and controlling wording in § 362(c)(3)(A) is that the stay under subsection (a) “terminates.” The Court construes the remaining language of “with respect to the debtor” to define which debtor is effected [sic] by this provision . . . . [I]n a joint case, a “debtor” may not necessarily mean both debtors if one debtor did not have a case dismissed within the year prior to the current petition date. . . . Unless § 362(c)(3)(A) effects a termination of the automatic stay for property of the estate, there would not appear to be a need to provide parties in interest with the right to move to extend the stay or a need to extend the stay as to all creditors. This Court would waste resources laboring over whether to extend the automatic stay even though such a motion would appear to be of no utility to a debtor . . . . The legislative history supports this Court’s interpretation of § 362(c)(3)(A) because it is evident that the intent of the drafters was to terminate all protections of the automatic stay under this new subsection.15
[11]

The only appellate court to address the issue sides with the majority and concludes that § 362(c)(3)(A) does not terminate any stay with respect to property of the Chapter 13 estate. In In re Jumpp,16 the Bankruptcy Appellate Panel for the First Circuit found the plain language in § 362(c)(3)(A) to be unambiguously different from the language of § 362(c)(4)(A)(i)—compelling the different outcome that stay termination under § 362(c)(3)(A) did not extend to the portions of § 362(a) that protect property of the estate. As stated by the BAP, “we are unconvinced that the significant difference in language between the two sections reveals a Congressional intent to say the very same thing. Rather, the language indicates an intent to differentially penalize previous filers based on the number of previous cases.”17 With respect to whether this interpretation produced an absurd result, the First Circuit BAP disagreed with Jupiter:

The Panel disagrees with Jupiter that a partial termination of the stay would fail to discourage abusive filings. Lifting the stay with respect to the debtor and property of the debtor does penalize the debtor and does provide potential options to creditors. . . . [S]uits against the debtor can commence or continue postpetition because section 362(a)(1) is no longer applicable; judgments may be enforced against the debtor, . . . collection actions may proceed against the debtor . . . and liens against the debtor’s property may be created, perfected and enforced . . . . A partial termination also protects creditors by protecting estate property. . . . Section 362(c)(3)(A) provides for a partial termination of the stay, which, although a lesser penalty than complete termination, nonetheless discourages abusive filings and, therefore, is a result that is neither absurd nor demonstrably at odds with the intention of the drafters.18
[12]

Given the statutory limitations in § 362(c)(3)(A), and the confirming opinions of a substantial number of courts, the better part of wisdom for creditors is caution when a Chapter 13 debtor refiles within a year of a prior pending and dismissed bankruptcy case. Section 362(j) provides, on request of a party in interest, “the court shall issue an order under [§ 362(c)] confirming that the automatic stay has been terminated.”19 One way to read § 362(j) is that bankruptcy courts can issue “comfort orders” declaring whether the automatic stay terminated 30 days after the petition under § 362(c)(3).20 In serial filing situations, creditors should consider combining a traditional motion for relief from the stay with a motion under § 362(j). Proceeding against estate property without either is an invitation to sanctions.

[13]

Not addressed by § 362(c)(3) is the question whether a confirmed plan trumps whatever stay termination effect is realized after 30 days in a debtor’s second bankruptcy case within a year. Section 362(c)(3) deals only with the automatic stay and contains no cross-reference to the effect of confirmation under § 1327.21


 

1  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?.

 

2  11 U.S.C. § 362(c)(3)(A) (emphasis added).

 

3  The ordinary parameters of the automatic stay in § 362(a) are discussed in §§ 68.1 [ Usual Protections ] § 58.1  Usual Protections74.1 [ Expiration of Stay ] § 58.14  Expiration of Stay.

 

4  See §§ 45.1 [ What Is Property of the Chapter 13 Estate? ] § 46.1  What Is Property of the Chapter 13 Estate?47.8 [ Miscellaneous Real and Personal Property ] § 46.12  Miscellaneous Real and Personal Property.

 

5  See 11 U.S.C. §§ 541, 1306 and 1327(b), discussed in §§ 45.1 [ What Is Property of the Chapter 13 Estate? ] § 46.1  What Is Property of the Chapter 13 Estate?, 207.1 [ Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) ] § 113.11  Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) and 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate.

 

6  See In re Harris, 342 B.R. 274, 280 (Bankr. N.D. Ohio 2006) (“[Section] 362(c)(3)(A) terminated the automatic stay as to (1) any action taken with respect to a debt of the debtor; (2) any action taken with respect to property of the debtor; and (3) any action taken with respect to any lease of the debtor.”); In re Bell, No. 06-11115 EEB, 2006 WL 1132907, at *2 (Bankr. D. Colo. Apr. 27, 2006) (unpublished) (Stay that terminates is limited to actions against the debtor. “While the Court finds that Section 362(c)(3) is applicable to this case, its provisions are limited in scope. Its termination of the automatic stay after thirty days is limited to actions taken against the Debtors . . . . [I]t is applicable only to a prepetition ‘action taken with respect to a debt or property securing such debtor or with respect to any lease.’ Thus, it applies only to the continuation of actions commenced against a debtor prepetition.”); In re Jones, 339 B.R. 360, 365 (Bankr. E.D.N.C. 2006) (The stay that expires in 30 days under § 362(c)(3) is the stay with respect to “actions taken” against the debtor or against property of the debtor. “[Section] 362(c)(3)(A) terminates the stay with respect to actions taken against the debtor and against property of the debtor, but does not terminate the stay with respect to property of the estate.”); In re Baldassaro, 338 B.R. 178, 184 (Bankr. D.N.H. 2006) (“[I]f there were no ‘actions taken’ prior to the commencement of [this] Case, there would be nothing to which the limitation of the automatic stay would apply . . . . [T]he . . . mortgage foreclosure . . . was an ‘action taken’ within the meaning of the statute.”); In re Paschal, 337 B.R. 274 (Bankr. E.D.N.C. 2006) (The stay that terminates after 30 days is only with respect to formal actions taken against the debtor before the petition.).

 

7  337 B.R. 274 (Bankr. E.D.N.C. 2006).

 

8  337 B.R. at 278–81.

 

9  358 B.R. 816 (Bankr. S.D. Ga. 2007).

 

10  358 B.R. at 819.

 

11  See §§ 433.1 [ When Does § 362(c)(4) Apply? ] § 61.1  When Does § 362(c)(4) Apply?434.2 [ Proof of Good Faith ] § 61.4  Proof of Good Faith.

 

12  339 B.R. 360 (Bankr. E.D.N.C. 2006).

 

13  339 B.R. at 363–65. Accord In re Hollingsworth, 359 B.R. 813, 813–14, 814 (Bankr. D. Utah 2006) (Adopting reasoning in In re Johnson, 335 B.R. 805 (Bankr. W.D. Tenn. 2006), “the plain language of § 362(c)(3)(A) dictates that the 30-day time limit applies only to ‘debts’ or ‘property of the debtor’ and not to ‘property of the estate.’ . . . Relief under § 362(c)(3)(B) is necessary to a debtor only when the debtor identifies ‘debts’ or ‘property of the debtor’ in need of the continued protection of the automatic stay. The only asset identified in debtor’s motion is the debtor’s home, which because it is property of the estate, will continue to be protected by the automatic stay beyond the 30 day period found in § 362(c)(3)(A).” Debtor’s motion to extend automatic stay “does not contain a present controversy and is not well taken.”); In re Pope, 351 B.R. 14, 16–17 (Bankr. D.R.I. 2006) (Adopting “majority” view, “termination of the automatic stay under Section 362(c)(3)(A) applies only to the debtor or the debtor’s property, and not to property of the estate.”); In re Brandon, 349 B.R. 130, 132 (Bankr. M.D.N.C. 2006) (The stay that terminates under § 362(c)(3)(A) is with respect to the debtor; property of the estate remains protected. “By including ‘with respect to the Debtor’ in § 362(c)(3)(A), Congress included a limitation on the extent to which the Stay would terminate . . . . [A]pplying the language of § 362(c)(3) does not produce absurd results.”); Bankers Trust Co. of Cal, N.A. v. Gillcrese (In re Gillcrese), 346 B.R. 373, 376 (Bankr. W.D. Pa. 2006) (Stay that terminates in 30 days pursuant to § 362(c)(3)(A) is the stay as to the debtor’s property and the debtor; stay does not terminate with respect to property of the estate. “The plain language of the statute clearly indicates that, after the 30 day period, the automatic stay will terminate as to the debtor. Noticeably missing from this provision is any reference to the property of the estate. . . . If Congress wanted to expansively sweep away the protections of the automatic stay in situations governed by § 362(c)(3)(A), it could have done so similarly to the way that it did in § 362(c)(4)(A).”); In re Williams, 346 B.R. 361, 367–69 (Bankr. E.D. Pa. 2006) (“[S]ince § 362(c)(3)(A) does not purport to terminate the stay as to estate property—a concept defined by section 541(a), and which property is distinct from the debtor or the debtor’s property—the stay provisions imposed by sections 362(a)(3), (a)(4), and part of (a)(2), expressly protecting property of the estate, do not expire after thirty days. . . . If Congress had intended in section 362(c)(3)(A) that the entire automatic stay created by section 362(a) be terminated after thirty days, and not just the bankruptcy stay as to the debtor and his property, it would have used the same language as found in section 362(c)(4)(A)(i), promulgated at the same time. . . . [C]onstruction of section 362(c)(3)(A) as written does not lead to an absurd result. . . . Congress has balanced competing interests. . . . By continuing to protect estate property in section 362(c)(3), Congress was allowing chapter 7 trustees the normal opportunity to determine . . . whether there is non-exempt equity in property of the estate that could be liquidated for the benefit of creditors. . . . [S]ection 362(c)(3)(A), as written, permits mortgage lawsuits, against the individual debtor . . . to commence or continue until judgment . . . . [A]nother plausible balancing of competing interests.”); In re Harris, 342 B.R. 274, 279–80 (Bankr. N.D. Ohio 2006) (Stay does not terminate with respect to property of the estate. “Had Congress intended § 362(c)(3)(A) to completely terminate the automatic stay, it could have used the same straightforward language it used in § 362(c)(4)(A)(i). . . . [Section] 362(c)(3)(A) terminated the automatic stay as to (1) any action taken with respect to a debt of the debtor; (2) any action taken with respect to property of the debtor; and (3) any action taken with respect to any lease of the debtor. No other portion of the automatic stay, including the stay relating to property of or from the estate, was effected [sic].”); In re Bell, No. 06-11115 EEB, 2006 WL 1132907, at *2 (Bankr. D. Colo. Apr. 27, 2006) (unpublished) (Stay that terminates is limited to actions against the debtor, not property of the estate. “While the Court finds that Section 362(c)(3) is applicable to this case, its provisions are limited in scope. Its termination of the automatic stay after thirty days is limited to actions taken against the Debtors, not property of the estate. Furthermore, it is applicable only to a prepetition ‘action taken with respect to a debt or property securing such debtor or with respect to any lease.’ Thus, it applies only to the continuation of actions commenced against a debtor prepetition.”); In re Moon, 339 B.R. 668, 673 (Bankr. N.D. Ohio 2006) (“[T]he language of § 362(c)(3)(A) unambiguously terminates the automatic stay only as it applies to ‘debts’ or ‘property of the debtor.’”); In re Johnson, 335 B.R. 805, 806–07 (Bankr. W.D. Tenn. 2006) (Order extending stay under § 362(c)(3) is superfluous because stay that expired does not extend to property of the estate. “[T]he plain language of § 362(c)(3)(A) dictates that the 30 day time limit only applies to ‘debts’ or ‘property of the debtor’ and not to ‘property of the estate.’ As a result, the automatic stay continues to protect ‘property of the estate’ as long as it remains ‘property of the estate.’ . . . [A]ll property defined by either § 541 or § 1306 as ‘property of the estate’ remains ‘property of the estate’ in chapter 13 cases in this district until the case is either dismissed or discharged or until the court orders otherwise. Consequently, the automatic stay is not terminated with respect to ‘property of the estate’ on the 30th day. . . . [T]he Court’s decision to grant the debtor’s motion to extend the stay . . . was superfluous. The stay did not terminate with respect to the debtor’s home . . . . Any creditor seeking to foreclose or repossess property, which is by statute ‘property of the estate,’ must file an appropriate motion seeking relief from the automatic stay.”).

 

14  344 B.R. 754 (Bankr. D.S.C. 2006).

 

15  344 B.R. at 759–61. Accord In re Jumpp, 344 B.R. 21, 26–27 (Bankr. D. Mass. 2006) (Stay that expires under § 362(c)(3) is entire automatic stay. “With due respect to those courts finding that the language of § 362(c)(3)(A) only terminates the automatic stay as to property of the debtor, this Court finds that the language of the section, even when read in isolation, is less than clear. The legislative history, while sparse, does not indicate that there was an intent to differentiate between the debtor’s and the estate’s property. . . . The thrust of amended section 362 is to burden the so-called ‘repeat filer’ with demonstrating why the automatic stay should be extended. To read § 362(c)(3)(A) as only terminating the automatic stay as to property of the debtor frustrates this goal. . . . [A] limited reading of the section would place some creditors . . . in the situation of having relief to proceed against [the debtor’s] exempted equity but being frustrated because the collateral, at least to the extent secured by the creditors’ claims, remains property of the estate. . . . The Court does not believe that Congress intended to give a debtor filing her second bankruptcy within one year after her previous case was dismissed significantly greater protection than a debtor who is filing her third petition. . . . [T]he distinction that Congress was intending is that the ‘two-time’ filer gets some breathing space, albeit only thirty days unless within that time the Court finds the debtor has met her burden for extending the stay while a debtor filing her third or more petition has no automatic stay protection. It is the number of filings that is the critical distinction Congress was asking courts to make, not to the extent to which the automatic stay applies. It is difficult to imagine that Congress intended that the harsh effect of § 362(c)(4)(A) and the virtually meaningless one that would result from the interpretation of § 362(c)(3)(A) urged by these Debtors is to be occasioned by the filing of one additional bankruptcy petition.”), rev’d, 356 B.R. 789 (B.A.P. 1st Cir. 2006).

 

16  356 B.R. 789 (B.A.P. 1st Cir. 2006).

 

17  356 B.R. at 796.

 

18  356 B.R. at 796–97.

 

19  11 U.S.C. § 362(j).

 

20  See In re Murphy, 346 B.R. 79 (Bankr. S.D.N.Y. 2006) (Ex parte “comfort order” under § 362(j) can only declare whether stay has terminated 30 days after the petition.).

 

21  The binding effect of confirmation under 11 U.S.C. § 1327 is discussed in §§ 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors and 505.1 [ Effects of Confirmation after BAPCPA ] § 120.5  Effects of Confirmation after BAPCPA. See, e.g., In re Murphy, 346 B.R. 79, 82–83 (Bankr. S.D.N.Y. 2006) (Not appropriate on a § 362(j) motion to determine whether plan confirmation would be binding or whether moving creditor is entitled to attorney’s fee. “Section 362(c)(3) applies, and the stay terminated in this case on the thirtieth day after the Debtor filed the petition . . . . Pursuant to 11 U.S.C. § 362(j), the Court is required to issue an order confirming that the automatic stay has terminated . . . . The Court will not consider the Creditor’s ex parte request for a prospective determination that the subsequent confirmation of a Chapter 13 plan would not be binding. . . . Because termination of the stay under Section 362(c) is not the equivalent of termination of the Chapter 13 case, it is still possible for a debtor to confirm a Chapter 13 plan when the stay terminates early in the case under Section 362. Because confirmation of a Chapter 13 plan will ‘bind each creditor’ it follows that termination of the automatic stay as to all creditors under Section 362(c) does not automatically relieve all creditors, for all purposes, from the binding effect of a subsequently confirmed Chapter 13 plan.”).