The automatic stay is a key motivator for individuals filing for both Chapter 7 and Chapter 13 bankruptcy, often shaping when they choose to do so. The automatic stay is mostly utilized in Chapter 13 filings due to its ability to prevent vehicle repossession, wage garnishment, and home foreclosure for up to 5 years. Because of its strength, legislators anticipated potential misuse of this bankruptcy protection and imposed limitations on its repeated use in successive bankruptcies. As a result, with each subsequent bankruptcy filing, the strength of this protection diminishes significantly. In my experience, navigating this aspect of bankruptcy law is a common challenge for self-represented filers and even some legal professionals. This article aims to clarify the implications of these limitations and outline the necessary steps to safeguard this right.
Which Cases Get An Automatic Stay?
| First Bankruptcy in One Year Period | Regular Automatic Stay |
| Second Bankruptcy in One Year Period* | 30 Day Automatic Stay |
| Third or More Bankruptcy in One Year Period* | No Automatic Stay |
How to Extend the Automatic Stay for Successive Filings
As you can see, the protection of the automatic stay diminishes with each subsequent bankruptcy filing. To prolong the stay and restore its full effect, the bankruptcy code outlines specific steps necessary to reinstate the automatic stay to its full 3-5 year length:
“on the motion of a party in interest for continuation of the automatic stay and upon notice and a hearing, the court may extend the stay in particular cases as to any or all creditors (subject to such conditions or limitations as the court may then impose) after notice and a hearing completed before the expiration of the 30-day period only if the party in interest demonstrates that the filing of the later case is in good faith as to the creditors to be stayed”
11 U.S.C. § 362(c)(3)(B)
How to File a Motion to Extend the Automatic Stay
If you’ve filed for bankruptcy more than once, you’ll need to submit a motion to extend the automatic stay. It’s crucial to note the date of your bankruptcy filing, as it triggers the timeline for when the motion must be heard. The motion itself must be scheduled within 30 calendar days of your bankruptcy filing; failure to do so will result in denial. This step is paramount. It’s important to review the judge’s calendar to identify available hearing dates and to avoid any scheduling conflicts, taking into account court holidays. In instances where providing adequate notice to creditors and scheduling the motion within 30 days is impossible, you have the option to file a motion to shorten the notice period.
As to the content of the motion, it’s crucial to confront a significant challenge: the Court’s presumption of bad faith regarding your bankruptcy filing. This presumption is triggered simply by filing successive bankruptcies within a 12-month period. Moreover, 11 U.S.C. § 362(c)(3)(C) outlines specific circumstances where the presumption can also arise, including failure to file or amend necessary documents, insufficient provision of adequate protection payments, or non-compliance with the terms of a confirmed plan.
Therefore, it’s crucial to provide a comprehensive explanation and evidence addressing any potential grounds for the presumption of bad faith. This may include detailing any extenuating circumstances or challenges faced by the Debtors, demonstrating their efforts to comply with legal requirements and fulfill obligations under previous bankruptcy plans, and outlining the proactive steps taken to rectify any past shortcomings.
The most crucial aspect is demonstrating a significant change in the debtors’ financial situation since the last bankruptcy. This entails proving an increase in income or other financial resources, which strengthens the case for confirmation and overall success of the current bankruptcy filing. It’s essential to meet the clear and convincing standard, providing compelling arguments supported by an affidavit to rebut the presumption of bad faith and bolster the case for extending the automatic stay.
Have you Filed in Bad Faith?
One common example of improper filing is when someone uses the automatic stay to halt a foreclosure auction and stay in their home. They do this by filing for Chapter 13 right before the auction, effectively pausing the sale. However, instead of actively engaging in the Chapter 13 case, the debtor fails to make any plan payments or provide sufficient protection to the mortgage holder. Consequently, the creditor may file a motion for relief from the stay or the trustee may motion to dismiss the case.
If the case was dismissed—whether by the trustee or at the debtor’s request—while the motion for relief was pending, the second filing is automatically deemed as bad faith. The bankruptcy system identifies and penalizes individuals who exploit the automatic stay through repeated filings.
Back in Good Graces, with Steven J. Grace
In navigating the complexities of bankruptcy law, especially concerning the extension of the automatic stay, having an experienced attorney like Steven J. Grace, a distinguished Chicago bankruptcy attorney, can make a significant difference. With years of expertise in handling motions to extend the automatic stay to safeguard homes, vehicles, and wages, Steven J. Grace offers invaluable guidance and support to individuals navigating the bankruptcy process. As part of his commitment to helping individuals overcome financial challenges, Steven J. Grace is currently offering a free 30-minute phone consultation to discuss your case and explore the best path forward. Don’t navigate the complexities of bankruptcy alone—reach out to Steven J. Grace today for expert guidance and personalized assistance.
