Bankruptcy: Automatic Stay Never in Effect
If a debtor files a new bankruptcy petition and had two or more single or joint bankruptcy cases dismissed in the prior year (other than through a Section 707(b) dismissal), the automatic stay does not go into effect upon the filing of the new petition. 11 U.S.C. § 362(c)(4). Section 362(c)(4)(B)— a provision similar to 11 U.S.C. § 362(c)(3)(B)—allows a party in interest to file a motion seeking application of the stay. The moving party must file the motion within thirty days of the date the new case was filed and must establish by clear and convincing evidence that the current filing was not made in bad faith.
If the court orders that the stay is to take effect in the new case, the effective date of the stay is the date the order is entered allowing the stay to go into effect; the stay is not retroactive to the date the new case was filed. 11 U.S.C. § 362(c)(4)(C). If the debtor files a motion under 11 U.S.C. § 362(c)(4) to have the stay take effect and a collection action (such as a foreclosure sale) is held between the date the motion is filed and the date the order allowing the motion is entered, the collection action is valid and has not violated the automatic stay.
Under 11 U.S.C. § 362(c)(4)(D) (which is similar to 11 U.S.C. § 362(c)(3)), it is presumed that a new filing was made in bad faith when
- the debtor had two or more cases pending within the prior year;
- one of debtor's cases filed in the previous year was dismissed after the debtor failed to comply with a court order;
- there has been no substantial change in the financial or personal affairs of the debtor since the dismissal of the most recent case; or
- as to a particular creditor, in a prior case the creditor had filed a motion for relief from stay that was still pending as of the date the case was dismissed or was resolved by terminating, conditioning, or limiting the stay as to that creditor.11 U.S.C. § 362(c)(4)(D).
Subsections 362(c)(3) and (4) do not require a creditor to confirm with the court that the automatic stay either has terminated after thirty days or did not arise at all. However, in order to avoid a later claim that its collection action violated the stay, the creditor should consider requesting a “comfort order” confirming that the automatic stay either is not in place or has terminated. The code authorizes a creditor to request a comfort order in Section 362(c)(4) situations, see 11 U.S.C. § 362(c)(4)(A)(ii), and in all other instances where the automatic stay has terminated, see 11 U.S.C. § 362(j). According to 11 U.S.C. § 362(c)(4)(A)(ii), the court will enter the comfort order “promptly.” A sample motion for a comfort order pursuant to 11 U.S.C. § 362(c)(4)(A)(ii) is attached as Exhibit F.”
Excerpts taken from:
BKR MA-CLE 19
Massachusetts Continuing Legal Education, Inc.
Moving for Relief from the Automatic Stay in Bankruptcy
DETERMINING THE APPROPRIATE RELIEF TO SEEK
SANJIT S. KORDE [FNa]
DONALD R. LASSMAN [FNb]
JULIE A. RANIERI [FNc]
Copyright© 1992, 2006 by Massachusetts Continuing Legal Education, Inc.