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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Automatic Stay in Bankruptcy - How Long Does the Automatic Stay Last?

Automatic Stay in Bankruptcy - How Long Does the Automatic Stay Last?

The automatic stay in bankruptcy is a powerful consumer protection device. Contained in Section 362 of the U.S. Bankruptcy Code, it halts most creditor actions against you from the moment your case is filed. But the automatic stay doesn't last forever.

In general, the automatic stay ends when one of these three actions occurs:

when your case is closed; at the time of dismissal of your case; or when your discharge is granted or denied.

If the bankruptcy discharge is granted and the case is closed then the automatic stay becomes permanent in the form of the discharge injunction. If the case is dismissed or the discharge is denied then creditors may take action against you. But the automatic stay may end early if you filed a previous case within the past year. For example:

If you have filed one Chapter 13 Bankruptcy court lift the stay to enable them to take action against you or your property. There are specific requirements governing their ability to do so, and the court will require certain proof before lifting the stay.

In general, the motion for relief from stay (that's what it's called) will be filed by a mortgage company or car lender when you fall behind on your payments. They will want to get the stay lifted so they can either begin or continue foreclosure proceedings, or repossess the property immediately.

Motions for relief from stay are also sometimes filed when you're being sued by someone prior to filing your case, or in other limited situations. Credit card companies and other unsecured creditors usually won't file a motion for relief from stay because there's nothing to be gained from doing so; in a Chapter 7 case your debt will be discharged within a few short months anyway.

Even if the automatic stay is lifted, that does not mean your bankruptcy case will fail. You may still be able to get a discharge of your debts; the discharge injunction will effectively re-impose the prohibition against taking action against you.

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