A Debtor Can Lose the Protections of the Bankruptcy Automatic Stay

The “Automatic Stay” is a key protection in filing bankruptcy. The Automatic Stay is an Order that prohibits collection action by a creditor on a debt once the bankruptcy is filed.  The Automatic Stay usually prohibits foreclosure, repossession, garnishment, lawsuits, phone calls, etc.  (See, 11 USC § 362)  HOWEVER, if a Debtor in a new bankruptcy has filed a bankruptcy before, the protection of the “Automatic Stay” in the new case might not be available.

One Prior Bankruptcy Case Dismissed Within The Year Prior To Filing – 30 Days!

If you have been a debtor in a prior bankruptcy case which was dismissed within the year before your new bankruptcy case is filed, the automatic bankruptcy stay in the current/new case will terminate within 30 days of the filing of the new case, unless a Debtor takes action to extend the stay as noted below.

Two Or More Prior Bankruptcy Cases Dismissed Within The Year Prior To Filing – No Stay!

If you have been a debtor in two or more bankruptcy cases dismissed within the year prior to filing the new/current case, no automatic stay goes into effect and no stay will go into effect in the new/current case unless a Debtor takes action to reimpose the stay as noted below.

How To Obtain Protection Of The Automatic Stay

The Debtor must file a Motion with the Court and request the protection of the Automatic Stay.  As noted, if there has been one prior case in the year prior to the new/current case filing, the Debtor would request an extension of the Stay past 30 days.  If there have been two or more prior cases in the year prior to the new/current case filing, there is no automatic stay upon filing and the Debtor would request the Stay be reimposed.

In either scenario, the Motion and supporting Declaration(s) must set forth a basis for the Court to conclude with “clear and convincing” evidence that the there has been a significant change (improvement) in the Debtor’s financial circumstances, etc. since the last case was dismissed.  If there was one prior case, the Motion must be both filed and HEARD by the court before the expiration of the 30 days.  If two prior cases, the motion can be filed at any time BUT there is no stay in effect until the Court reimposes the stay by entry of the Order.

Filing Multiple Cases

Filing multiple bankruptcy cases in an attempt to obtain relief can create a real problem for a debtor.   It’s best to do it right the first time.  Please let us know if we can be of assistance.