§ 61.2     Procedure, Timing and Form for Imposing Stay
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 61.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

When a Chapter 13 debtor had two or more bankruptcy cases pending but dismissed within a year, no automatic stay arises at the filing of the current petition under § 362(c)(4).1 On timely motion, the bankruptcy court can order that a stay take effect in the case. Section 362(c)(4)(B) makes this provision for imposing a stay when no stay arose automatically:

[I]f, 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[.]2
[2]

There are lots of moving parts here. When § 362(c)(4) applies and there is no automatic stay, a request to impose the stay under § 362(c)(3)(B) must be filed within 30 days of the current petition. The courts have acknowledged that this 30-day period is a strict deadline and that a request to impose the stay filed after 30 days after the petition is not cognizable under § 362(c)(4)(B).3

[3]

The 30-day motion deadline in § 362(c)(4)(B) is different from the 30-day hearing completion requirement in § 362(c)(3). Detailed above,4 when a Chapter 13 debtor had one prior case pending and dismissed within a year, the § 362(a) stay arises at the current petition, but portions of that stay terminate 30 days after the petition unless the court orders an extension. To be eligible for stay extension under § 362(c)(3), a hearing on extension must be “completed” before expiration of the 30-day period.5 In contrast, when no automatic stay arose at the petition under § 362(c)(4) because of two or more prior pending and dismissed cases, a request to impose the stay must be filed within 30 days of the current petition, but § 362(c)(4) contains no limitation on when a hearing must be completed. It has been held that § 362(c)(4)(B) “does not require that notice and a hearing be completed within 30 days of the filing of the petition.”6

[4]

The words in § 362(c)(4)(B) could be interpreted to limit the power of a bankruptcy court to impose a stay when no motion is timely filed within 30 days after the current petition. In other words, when § 362(c)(4) is applicable, it is possible to draw an inference that if no party in interest files a request to impose the stay within 30 days of the petition, there will never be a stay imposed in the case. This proposition will be tested when a Chapter 13 debtor with two or more prior cases dismissed in the previous year misses the 30-day deadline in § 362(c)(4)(B) and then either files an untimely request to impose the stay or files an adversary proceeding requesting an injunction. This issue might also arise defensively when a creditor requests an order confirming that no stay is in effect.7

[5]

It has been held that § 362(c)(4)(B) is not the exclusive remedy available to a debtor who had two prior bankruptcy cases dismissed within a year: an injunction can be issued if the debtor satisfies the traditional conditions for an injunction in Rule 65 of the Federal Rules of Civil Procedure.8 Similar issues have arisen under § 362(c)(3) when parts of the § 362(a) stay terminate 30 days after a Chapter 13 petition and before the completion of a hearing on extension of the stay under § 362(c)(3)(B).9

[6]

The form of a request to impose the stay under § 362(c)(4)(B) is not specified by the statute, but use of the word “requests” typically suggests motion practice under Bankruptcy Rule 9013. In one reported decision, a debtor’s motion to extend the stay was interpreted by the court as a motion to impose the stay under § 362(c)(4)(B) though the motion was then denied because it was filed more than 30 days after the petition.10

[7]

Any “party in interest” has statutory standing to request an order imposing the stay under § 362(c)(4)(B). The statute does not define party in interest. In this context, the phrase is certainly broad enough to include the debtor and the Chapter 13 trustee. Creditors might claim party-in-interest status when it would be to a creditor’s advantage to have an automatic stay imposed with respect to collection action by other creditors. This would not be unusual in Chapter 13 practice because unsecured creditors often have little prospect of recovery from the debtor in a Chapter 7 case or outside of bankruptcy. Even a debtor in a third bankruptcy case within a year may offer incentives for an unsecured creditor to prefer the automatic stay in a Chapter 13 case over the alternatives. It is easy to imagine a Chapter 13 case in which a single creditor—for example, a mortgage holder—desires nonbankruptcy collection and the debtor’s plan proposes to cure default. Without an automatic stay to prevent foreclosure, the Chapter 13 case is shaky. With a new stay under § 362(c)(4)(B), the debtor might repair the mortgage relationship and pay a substantial dividend to unsecured creditors. In such a case it would make sense to define standing broadly to include unsecured creditors.

[8]

Section 362(c)(4)(B) requires “notice and a hearing” with respect to any request to impose the stay.11 Because a request to impose the stay under § 362(c)(4)(B) can be with respect to “any and all creditors,” the nature and extent of notice may depend on whether the request would impose a stay on a specific creditor or on all creditors.

[9]

As mentioned above, the statute is not specific with respect to when the hearing on imposing the stay must occur or how much notice is necessary. Because no stay is in effect, the moving party—typically the debtor—will want a hearing as quickly as possible to avoid the possible prejudice of creditor collection action in other courts. The parties that might oppose a request to impose the stay, of course, have exactly the opposite incentive—for so long as no hearing is held, no stay will be imposed and creditors are free to take judgments, foreclose on collateral and the like.

[10]

Two reported decisions both find five days’ notice of a motion to impose the stay under § 362(c)(4) is sufficient. In In re Frazier,12 the debtor filed an emergency motion to impose the stay under § 362(c)(4) and a hearing was scheduled five days later. The debtor’s attorney gave notice to counsel for a mortgage holder by phone, by facsimile and by regular mail. The bankruptcy court gave this account of the imperative for hearings on short notice under § 362(c)(4):

There is no question but that Centex did not receive much advance notice of the hearing on Debtor’s emergency motion. This situation was unfortunate, however, under the circumstances unavoidable. Had the Court waited longer to schedule the hearing on Debtor’s emergency motion, the foreclosure sale . . . would have been completed and any relief for the Debtor would have been rendered meaningless. While § 362(c)(4)(B) requires notice and hearing before the Court can impose the stay, the Bankruptcy Code’s definition of “notice and hearing” as contained in § 102(1) leaves it to the Court to determine what is appropriate in the particular circumstances. . . . The limited automatic stay for repeat filers is a major feature of BAPCPA which was passed by Congress at the behest of the credit industry. Now that they have it, the credit industry, and especially the mortgage servicing companies and the law firms they retain to represent them, need to adapt their practices in order to deal with what they have created. Since the effective date of BAPCPA, this Court has conducted evidentiary hearings on fifteen (15) Motions for the Extension or Imposition of the Stay in cases involving repeat filers. In only one of those hearings did an attorney appear on behalf of the mortgagee, and that attorney was a local consumer debtor lawyer who had been retained at the last minute.13
[11]

In contrast to the § 362(c)(3) cases,14 there is relatively little from the courts with respect to the content of a motion to impose the stay under § 362(c)(4). One bankruptcy court noted, “[A]ny motion to impose the stay must be accompanied by an affidavit” that addresses the debtor’s burden to demonstrate good faith.15 The party requesting a stay under § 362(c)(4)(B) must demonstrate that the filing of the current case is “in good faith as to the creditors to be stayed.”16 This is the same burden that applies when a debtor has one prior pending but dismissed bankruptcy case within a year and seeks to extend the 30-day stay under § 362(c)(3)(B).17 Under the conditions detailed in § 362(c)(4)(D),18 a presumption arises that the current case was filed “not in good faith” and that presumption can be overcome only by clear and convincing evidence. When no presumption applies, the burden to prove good faith in support of imposing the stay under § 362(c)(4)(B) would be the ordinary preponderance of the evidence.

[12]

Good faith is not defined by the Bankruptcy Code for purposes of imposing a stay when § 362(c)(4) applies. The tests of good faith for § 362(c)(4) purposes are sure to be as convoluted as the tests for good faith discussed above with respect to extension of the 30-day stay in § 362(c)(3).19

[13]

On a timely motion under § 362(c)(4)(B), the court can impose a stay “as to any or all creditors.”20 Keeping in mind that when § 362(c)(4) is applicable, no stay is in effect as to any creditor, most requests to impose the stay will be directed at all creditors. Notice of the motion and any scheduled hearing typically will go to all creditors, and the good faith the debtor must prove would be with respect to all creditors.

[14]

There are implications here for the content of the § 362(c)(4)(B) motion and of any affidavit or supporting documents. Facts in support of imposing a stay with respect to a mortgage holder might be quite different from facts supporting imposing a stay on all unsecured creditors. Counsel should pay attention to these differences when drafting a motion to impose the stay.

[15]

Corresponding attention is required when responding to a motion to impose the stay under § 362(c)(4). As demonstrated above with respect to motions to extend the stay beyond 30 days under § 362(c)(3),21 the failure of any creditor to respond to a motion to impose the stay may be a factor that favors granting the motion. If one creditor responds—a home mortgage holder, for example—and no other creditor responds, it can be anticipated that proof will focus on the responding creditor.

[16]

If the moving party demonstrates good faith in the filing of the current case for § 362(c)(4)(B) purposes, the bankruptcy court can impose a stay “subject to such conditions or limitations as the court may impose.”22 This certainly sounds like a broad grant of discretion to tailor the court-imposed stay to the facts and circumstances of individual Chapter 13 cases. There is no statutory guidance on what conditions or limitations the drafters had in mind. The language in § 362(c)(4)(B) is different from the “such as by terminating, annulling, modifying, or conditioning such stay” found in § 362(d). Conditioning the automatic stay after a motion for relief from the stay is common in Chapter 13 practice—particularly with respect to secured creditors and future defaults under the plan.23 Given that § 362(c)(4) will only be applicable when the debtor has had at least three bankruptcy cases within a year, it can be anticipated that conditions or limitations on a newly imposed stay will be common.

[17]

If the moving party prevails and the court imposes a stay under § 362(c)(4)(B), that stay “shall be effective on the date of the entry of the order allowing the stay to go into effect.”24 At first blush, this is a strange limitation on the power of the bankruptcy court to impose a stay when no stay is in effect given that orders typically are not effective until entered. But a likely inference from these words is the preclusion of orders that would time shift the effectiveness of the newly imposed stay to an earlier moment in the Chapter 13 case. Automatic stays are routinely “annulled” to times in the past.25 Section 362(c)(4)(C) could be interpreted to prohibit imposing a stay retroactive in time. If read this way, § 362(c)(4)(C) would be good news to creditors that successfully take collection action during the Chapter 13 case but before a stay is imposed under § 362(c)(4)(B). A decision to impose a new stay based on a finding of good faith would not render earlier action void or voidable under traditional automatic stay analysis.

[18]

Section 362(c)(4)(C) could be read that an order imposing the stay is immediately effective upon entry and is not delayed in its effectiveness by any other statute or rule with respect to the effectiveness of orders and judgments. This is not a change from expected practice. Given that a stay—automatic or otherwise—is in the nature of an injunction, an order imposing a stay under § 362(c)(4)(B) would usually be effective immediately unless ordered otherwise by the court.26

[19]

That an order imposing a stay is effective on the “date” of entry threatens the same issue that has arisen with respect to counting the 180 days preceding the “date” of the petition for purposes of eligibility under § 109(h):27 Does “date” mean the calendar day of entry or the clock-time moment the order is docketed? This will inevitably arise and make a difference when a Chapter 13 debtor races a foreclosing creditor and the order imposing a stay under § 362(c)(4)(B) is entered on the same calendar day but moments before or after the hammer falls. In this context, it seems likely that courts will interpret the date to mean the moment in time that a stay is ordered by the bankruptcy court, but this outcome is not assured. Mentioned above,28 there is controversy whether imposing a stay under § 362(c)(4)(B) is available when the debtor has only one prior pending but dismissed bankruptcy case within the year but has either failed to file a motion to extend the stay within 30 days for § 362(c)(3)(B) purposes or has failed to schedule a hearing that can be completed within 30 days of the current petition. In other words, if extension of the 30-day stay under § 362(c)(3)(B) is procedurally not available, can the court entertain a motion filed within 30 days of the current petition that is heard after 30 days that seeks to impose a stay using § 362(c)(4)(B)? Applying somewhat convoluted logic, the Bankruptcy Court for the Southern District of Texas concluded in In re Toro-Arcila29 that § 362(c)(4) can be used to impose a stay when there has been only one prior dismissed bankruptcy case within a year so long as the motion to impose the stay is filed within 30 days of the current petition:

[A]t first blush, § 362(c)(4) appears to apply only to multiple repeat filers and not to first-time repeat filers. . . . The problem with the “first blush” interpretation is that it renders virtually all of § 362(c)(4)(D) to be meaningless surplusage. Section 362(c)(4)(D)(i)(I) applies to all creditors in all cases governed by § 362(c)(4)(A). If the “later case” referred to in § 362(c)(4)(B) must be a later case of a type described in § 362(c)(4)(A), then there will be no instances in which the language in §§ 362(c)(4)(D)(i)(II), (D)(i)(III), or (D)(ii) would ever be considered. . . . [T]he Court concludes that Congress intended for subsection (B) to apply to cases in which there is a timely request that the stay be imposed, whether the case is the first repeat filing or a subsequent repeat filing. This interpretation gives meaning to subsection (D) and provides a more consistent application of §§ 362(c)(3) and (4).30

 

1  11 U.S.C. § 362(c)(4)(A)(i), discussed in § 433.1 [ When Does § 362(c)(4) Apply? ] § 61.1  When Does § 362(c)(4) Apply?.

 

2  11 U.S.C. § 362(c)(4)(B).

 

3  See, e.g., In re Wright, 339 B.R. 474 (Bankr. E.D. Ark. 2006) (A stay may be imposed under § 362(c)(4)(B) “only if a motion is filed within 30 days after the filing of the later case.” Debtor’s failure to file a motion until more than a month after the stay expired is fatal to any argument that the bankruptcy court can impose a stay under § 362(c)(4).); In re Beasley, 339 B.R. 472, 474 (Bankr. E.D. Ark. 2006) (“[A] stay may be imposed under section 362(c)(4)(B) only if a motion is filed within 30 days after the filing of the later case.”).

 

4   See§ 60.1  When Does § 362(c)(3) Apply?

 

5  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.

 

6  In re Whitaker, 341 B.R. 336 (Bankr. S.D. Ga. 2006).

 

7  See 11 U.S.C. § 362(c)(4)(A)(ii), discussed in § 433.1 [ When Does § 362(c)(4) Apply? ] § 61.1  When Does § 362(c)(4) Apply?.

 

8  See In re Schroeder, 356 B.R. 812, 813 (Bankr. M.D. Fla. 2006) (Although debtor in third Chapter 13 case within a year did not file motion to invoke automatic stay within 30 days after petition as required by § 362(c)(4)(B), debtor did establish that filing of third case was in good faith and “[a]n injunction shall issue enjoining all creditors from taking any action inconsistent with the stay provisions of 11 U.S.C. § 362(a). The injunction shall terminate in the event the Debtors default on their plan payment obligations.”).

 

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

 

10  In re Davis, No. 06-10463, 2006 WL 2088269 (Bankr. M.D.N.C. June 30, 2006).

 

11  11 U.S.C. § 362(c)(4)(B).

 

12  339 B.R. 516 (Bankr. N.D. Fla. 2006).

 

13  339 B.R. at 518. See In re Wilson, 336 B.R. 338 (Bankr. E.D. Tenn. 2005) (Under local rules, a motion to impose the stay under § 362(c)(4) requires five days’ notice and service by e-mail or facsimile. Service of a motion to impose the stay under § 362(c)(4) by “U.S. mail and/or ECF” was procedurally defective.).

 

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

 

15  In re Wilson, 336 B.R. at 352.

 

16  11 U.S.C. § 362(c)(4)(B).

 

17   See § 60.4  (Rebuttable) Presumption of Lack of Good Faith and § 60.5  Proof of Good Faith.

 

18  336 B.R. at 352.

 

19  Proof of good faith for § 362(c)(3) purposes is discussed in § 432.5 [ Proof of Good Faith ] § 60.5  Proof of Good Faith. Proof of good faith for § 362(c)(4) purposes is discussed in § 434.2 [ Proof of Good Faith ] § 61.4  Proof of Good Faith.

 

20  11 U.S.C. § 362(c)(4)(B).

 

21  See §§ 432.3 [ Timing, Procedure and Form for Extension of Stay ] § 60.3  Timing, Procedure and Form for Extension of Stay and 432.5 [ Proof of Good Faith ] § 60.5  Proof of Good Faith.

 

22  11 U.S.C. § 362(c)(4)(B).

 

23  See § 82.1 [ Prospective, In Rem and Automatic Relief from Stay ] § 64.3  Prospective, In Rem and Automatic Relief from Stay.

 

24  11 U.S.C. § 362(c)(3)(C).

 

25  See § 82.2 [ Annulment of the Stay ] § 64.4  Annulment of the Stay.

 

26  See Fed. R. Bankr. P. 7062.

 

27  11 U.S.C. § 109(h) is discussed in § 369.3 [ Timing of Briefing ] § 19.2  Timing of Briefing.

 

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

 

29  334 B.R. 224 (Bankr. S.D. Tex. 2005).

 

30  334 B.R. at 226–28. Accord In re Wright, 339 B.R. 474 (Bankr. E.D. Ark. 2006) (Although the stay imposition provisions of § 362(c)(4)(B) apply to debtors who have suffered expiration of the stay under § 362(c)(3)(A), a stay may be imposed under § 362(c)(4)(B) “only if a motion is filed within 30 days after the filing of the later case.” Debtor’s failure to file a motion until more than a month after the stay expired under § 362(c)(3)(A) is fatal to any argument that the bankruptcy court can impose a stay under § 362(c)(4)(B).); In re Beasley, 339 B.R. 472, 474 (Bankr. E.D. Ark. 2006) (Adopting In re Hernan Toro-Arcila, 334 B.R. 224 (Bankr. S.D. Tex. 2005), “section 362(c)(4)(B) applies to cases in which the automatic stay has expired under section 362(c)(3)(A). . . . [A] stay may be imposed under section 362(c)(4)(B) only if a motion is filed within 30 days after the filing of the later case.”). Contra In re Whitaker, 341 B.R. 336 (Bankr. S.D. Ga. 2006) (Imposition of the stay under § 362(c)(4) is not available to one-time repeat filers who move for extension too late to give notice and have a hearing within 30 days of the petition.).