Automatic Stay in Bankruptcy - How Do Repeat Bankruptcy Filings Affect the Case?

Automatic Stay in Bankruptcy - How Do Repeat Bankruptcy Filings Affect the Case?

The automatic stay provisions of the U.S. Bankruptcy Code are some of the most powerful and immediate protections for people who need to be shielded from their creditors. The stay, however, is not perfect nor permanent.

In fact, there are limitations built into the automatic stay provisions that limit the effectiveness for people who have filed prior bankruptcy cases.

In the old days (before the current law came into effect in 2005) people could file case after case in rapid succession, dismissing the ones that didn't work out and filing new ones to stop their creditors.

For most people, these "serial filings" (as they came to be known) were made in good faith and with the best of intentions; someone would file a Chapter 13 Bankruptcy to stop a foreclosure, they'd miss a few post-petition payments and the mortgage lender to obtain relief from the automatic stay. Then the homeowner would get a better job and be able to make the payments.

So rather than stay in a Chapter 13 Bankruptcy Code, a case is presumptively filed in bad faith and subject to a limitation of the automatic stay if a prior case was filed and dismissed within the past year.

If 1 previous case under any of Chapter 11 Bankruptcy lawyer can file a motion with the court to impose or extend the automatic stay and keep it in place during your entire bankruptcy proceeding.

The grounds for such a motion to be granted include when there has been a substantial change in the financial or personal affairs of the debtor since the dismissal of the next most previous case. This can be a tricky area of practice, and it's important to discuss with your lawyer the chances of success of such a motion before filing a new case and potentially ending up with only a limited - or non-existent - automatic stay.

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