The automatic stay protects you and your property from your creditors when you file bankruptcy. This is one of the most important benefits of filing bankruptcy. But if you filed a previous bankruptcy case or two which were dismissed (closed without being completed), your new bankruptcy case may lose that crucial protection. The automatic stay is normally triggered by the filing of your bankruptcy case. But in rare circumstances the automatic stay does not kick in at all with the filing of your bankruptcy case-NOT AT ALL, not as to ANY of your creditors. Or in slightly different circumstances, the automatic stay gets triggered with the filing of your case as usual, but then it AUTOMATICALLY EXPIRES after 30 days unless the court affirmatively extends it. So what are those very dangerous circumstances?
1. IF you filed TWO OR MORE prior bankruptcies in the year before the one you are about to file, AND those prior cases were dismissed, the automatic stay does NOT go into effect at all with the filing of your new case. The automatic stay will only go into effect AFTER the case is filed, IF we can convince the bankruptcy judge that the current case was filed in good faith.
2) IF you filed ONE prior bankruptcy in the year before the one you are about to file, AND that prior case was dismissed, the automatic stay does go into effect at the filing of the new bankruptcy case, BUT THEN IT EXPIRES 30 days after that new case is filed, unless the bankruptcy judge is convinced and finds that the second case was filed in good faith. It is presumed that a case was filed in bad faith if:
- If you were a debtor in more than one previous bankruptcy case in the last year
- the previous case was dismissed because you failed to file documents, did not perform under the confirmed plan, or did not provide adequate protection or
- there has been no substantial change in the debtor’s financial or personal affairs since the dismissal of the previous case.
Note that if you have had one prior bankruptcy case dismissed within the previous year some courts have ruled that the stay terminates as to the debtor and property of the debtor, but not as to property of the estate. The courts have been split on this issue but the majority have ruled that the stay does not terminate as to property of the estate. The courts have not been unwilling to extend this protection where you have had two previous cases dismissed within the last year. If your have had a previous case dismissed within the last year, and you file for bankruptcy, then you should file a motion to:
- Continue the Stay-This motion should be filed and heard within 30 days of filing your bankruptcy case. It is very important that you have the matter heard within 30 days of filing your bankruptcy case or your motion will be denied. You may be able to file a motion to impose the stay if your motion cannot be heard within 30 days.
If you have had two previous cases dismissed within the last year, and you file for bankruptcy, then you should file a motion to:
- Impose the Stay-This motion should be filed within 30 days of filing your bankruptcy case but does not have to be heard within 30 days of filing.
Notice that if you have not had any prior bankruptcy cases filed within the last year, which were then dismissed, you don’t need to worry about any of this. But before you stop worrying, think back very carefully over the last year. Sometimes people file a bankruptcy without an attorney, and then do not finish the paperwork or pay the filing fee or show up to the hearing, so their case gets dismissed. Later, they may think that they didn’t “really file” because “nothing happened.” A similar situation might arise if a person was represented earlier by an attorney, and a case was filed but not completed because of some miscommunication. If there is any possibility that a bankruptcy was filed in your name during the year you come in to see me, be sure to tell me so I can check the appropriate court records.