Chapter 13 Debtor With Previously Filed Case May Seek Automatic Stay Under Section 362(C)(4)(B)
The United States Bankruptcy Court for the Southern District of Texas recently untied some of the knotty problems associated with the automatic stay for debtors who have pending bankruptcy cases within a prior one-year period. In re Toro-Arcila, 334 B.R. 224 (Bankr. S.D. Tex. Dec. 12, 2005)
The debtor filed a Chapter 13 case without disclosing in his petition that he had previously filed a Chapter 13 case, which had been dismissed only a few days prior to the filing of the instant case. Two weeks later, the debtor filed an amended petition this time disclosing the prior case, and then, on the 30th day after the initial petition, he filed a motion to extend the automatic stay beyond the initial 30-day period under 11 U.S.C. 362 § (c)(3)(B) and alternatively to impose a stay under 11 U.S.C. 362 § (c)(4)(B).
The court first rejected the debtor's motion to extend the stay under Section 362(c)(3)(B). That section provides that the automatic stay may be extended beyond 30 days only "after a notice and a hearing completed before the expiration of the 30-day period." Because the motion was filed on the 30th day after the petition was filed, and the motion obviously could not be heard until after the expiration of the 30-day period following the petition, the court denied this aspect of the motion, holding that the automatic stay terminated under 362(c)(3)(A) and could not be extended.
The court was more favorable to the debtor's request to impose a stay under Section 362(c)(4)(B). The court first noted that this aspect of the debtor's motion was timely because, unlike Section 362(c)(3)(B), Section 362(c)(4)(B) only requires that the motion be filed within 30 days, not that it be both filed and heard by the court within that time period.
The court then addressed the issue of whether the Section 362(c)(4)(B) applied under the circumstances. It noted that Section 362(c)(4)(A) expressly refers to debtors who have two or more prior cases pending (what it called "multiple repeat filers"), but the debtor in the instant case only had a single prior case (he was, in the court's language, a "first-time repeat filer'). Nevertheless, reading the statute in its entirety, the court held that Section 362(c)(4)(B) applies to both multiple and first-time repeat filers. The court reasoned that limiting the application of 362(c)(4)(B) to multiple repeat filers would lead to the anomalous result that individuals with more than one previously filed case could seek an automatic stay while those with only on previously filed case could not. Accordingly, the court held that the debtor was entitled to a hearing on his motion, but that there was no stay in force pending resolution of the motion.
Good article...but let's say a debtor HAS had two cases dismissed in the last year....we know the stay does not automatically go into effect on the third filing. But what if a foreclosure sale happens before the court can hear the motion to reimpose the stay after the third case is filed? What if the court grants the motion to impose the stay after the sale has already happened? I guess one possible answer is obvious- the debtor loses the house to foreclosure. Doesn't seem very fair, especially if the third plan is actually the one that would wind up being confirmed.
Rob, it's no surprise that the new statute has unfair outcomes--it wasn't written to protect debtors. Unfortunately, your analysis would appear to be correct under the language of the law, but in any given individual case a bankruptcy attorney may be able to find an approach that protects the debtor's interests in such a situation. For instance, in some locations required notice for hearing on motions to impose the stay may be reduced with permission from the Clerk. For a fuller discussion of the issues surrounding the application of 362(c)(4), see the American Bankruptcy Institute's BAPCPA Blog at http://bapcpa.blogspot.com/2006/02/oh-wont-you-362-stay-just-little-bit.html.