§ 58.14 — Expiration of Stay

Revised: April 30, 2004

[1]

11 U.S.C. § 362(c) applies in Chapter 13 cases and defines when the automatic stay expires.1 The stay of actions against property of the estate continues until the property is no longer property of the estate.2 As discussed above,3 property of the estate in a Chapter 13 case includes the debtor’s postpetition earnings and property acquired by the debtor after the petition. A Chapter 13 debtor’s earnings and property acquired after the petition are protected by the automatic stay, at least until confirmation.

[2]

Upon confirmation, § 1327(b) may divest property from the estate and vest it in the debtor.4 If neither the plan nor the order of confirmation provides otherwise, the property vesting in the debtor upon confirmation under § 1327 ceases to be protected by some aspects of the automatic stay pursuant to § 362(c)(1).5

[3]

However, other parts of § 362(a) continue to protect “property of the debtor” from collection action by prepetition creditors even if confirmation vested property of the estate in the debtor.6 Postpetition creditors may be free of the automatic stay with respect to property revesting in the debtor at confirmation.7 But even postpetition creditors must be cautious—some courts have held that the Chapter 13 estate is reconstituted at confirmation to contain earnings and property acquired by the debtor after confirmation even if confirmation vested all preconfirmation property in the debtor.8 In such a jurisdiction, the automatic stay would not expire at confirmation with respect to postpetition creditors and postconfirmation income and assets.

[4]

That the stay of actions against property of the estate may expire upon confirmation is a significant incentive for debtor’s counsel to make provision in every plan or order of confirmation preventing the vesting of property in the debtor.9 Maintaining the estate after confirmation also avoids expiration of the stay with respect to postpetition claim holders.10

[5]

If the plan or confirmation order overcomes the vesting effect in § 1327(b), the estate continues to exist throughout the Chapter 13 case, and all claim holders are bound by the automatic stay absent relief from the stay. When the debtor becomes entitled to a discharge, the stay is replaced by the permanent injunction and other protections in 11 U.S.C. § 524.11 If the case is dismissed before discharge, stay of actions against the debtor and property of the estate expires.

[6]

Under 11 U.S.C. § 362(c)(2), actions prohibited by § 362(a) that are not against property of the estate are stayed until the earliest of the following: the Chapter 13 case is closed, the case is dismissed or a discharge is granted or denied.12 Typically, a Chapter 13 case is not closed until sometime after the trustee has filed a final report. The discharge is granted or denied in a Chapter 13 case either after completion of all payments under the plan or at such earlier time as a “hardship discharge” is permitted.13 Dismissal of a Chapter 13 case is almost always preceded by a motion from the debtor, the trustee or a creditor,14 and entry of the order of dismissal marks the moment of expiration of the stay. It has been held that repossession of a car after an order of dismissal and while a motion for reinstatement15 was pending, but before entry of an order reinstating the Chapter 13 case, did not violate the stay because there was no stay.16

[7]

In a Chapter 13 case that is open for three to five years after confirmation, the automatic stay continuously prohibits actions against the debtor. This long-term protection of the automatic stay is one of the special attractions of Chapter 13.


 

1  11 U.S.C. § 362(c) provides:

Except as provided in subsections (d), (e), and (f) of this section—
(1) the stay of an act against property of the estate under subsection (a) of this section continues until such property is no longer property of the estate; and
(2) the stay of any other act under subsection (a) of this section continues until the earliest of—
(A) the time the case is closed;
(B) the time the case is dismissed; or
(C) if the case is a case under chapter 7 of this title concerning an individual or a case under chapter 9, 11, 12, or 13 of this title, the time a discharge is granted or denied.

 

2  11 U.S.C. § 362(c)(1).

 

3  See § 46.1 [ Postpetition Earnings ] § 46.3  Postpetition Earnings.

 

4  See § 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.

 

5  See § 243.1 [ Does Confirmation Dissolve the Stay? ] § 124.3  Does Confirmation Dissolve the Stay?.

 

6  See, e.g., 11 U.S.C. § 362(a)(5). See § 243.1 [ Does Confirmation Dissolve the Stay? ] § 124.3  Does Confirmation Dissolve the Stay?.

 

7  See § 238.2 [ Effects of Confirmation on Postpetition Claims ] § 122.4  Effects of Confirmation on Postpetition Claims.

 

8  See §§ 238.2 [ Effects of Confirmation on Postpetition Claims ] § 122.4  Effects of Confirmation on Postpetition Claims, 243.1 [ Does Confirmation Dissolve the Stay? ] § 124.3  Does Confirmation Dissolve the Stay? and 245.1 [ Postpetition Claims and Relief from the Stay ] § 124.5  Postpetition Claims and Relief from the Stay.

 

9  See § 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).

 

10  See §§ 238.2 [ Effects of Confirmation on Postpetition Claims ] § 122.4  Effects of Confirmation on Postpetition Claims and 243.1 [ Does Confirmation Dissolve the Stay? ] § 124.3  Does Confirmation Dissolve the Stay?.

 

11  See § 357.1 [ In General, Including Discharge Hearing and Discharge Injunction ] § 162.1  In General, Including Discharge Hearing and Discharge Injunction.

 

12  11 U.S.C. § 362(c)(2). See, e.g., Sedgwick v. Rubin (In re Sedgwick), 266 B.R. 185 (Bankr. N.D. Cal. 2001) (Automatic stay does not terminate in a Chapter 13 case at confirmation but continues until the earliest of the time the case is closed or dismissed or discharge is entered; creditor violated the stay by recording lien and filing state court action against the debtor based on erroneous advice of counsel that stay terminated at confirmation.).

 

13  Entry of discharge upon completion of all payments is discussed in § 156.1  Timing and Procedure for Discharge and Objecting to Discharge. Hardship discharge is discussed in § 160.1  In General.

 

14  See §§ 329.1 [ Procedure, Timing and Form ] § 151.1  Procedure, Timing and Form and 332.1 [ Procedure, Timing and Form ] § 152.1  Procedure, Timing and Form.

 

15  See § 340.1 [ Reinstatement after Dismissal ] § 153.4  Reinstatement after Dismissal.

 

16  In re Rivera, 280 B.R. 699 (Bankr. S.D. Ala. 2001).