Bankruptcy's automatic stay puts a stop to most collection activities. (To learn about the automatic stay and its reach, see the articles in our Bankruptcy's Automatic Stay area.) However, you can lose the protection of the automatic stay if you have filed for bankruptcy in the previous year. Here are the details.
Prior Bankruptcy Cases in the Previous Year: Limited or No Stay
The automatic stay will last only 30 days if you had a prior bankruptcy case pending within the year before you file (unless you can get the court to extend it). (11 U.S.C. §§ 362(c)(3) and (4).) And if you had two cases pending in the last year, the automatic stay will never kick in at all (unless the court orders it).
If the automatic stay terminates because of one or two prior pending cases, the property of the bankruptcy estate—in your current bankruptcy filing—is still protected. Your bankruptcy estate includes most types of property that you own or are entitled to receive when you file your bankruptcy papers, but does not include money earned or most property received after filing. For example, a creditor would not be entitled to seize money that was in your bank account on the date you filed, but could levy on wages you earned after filing, which are not part of the bankruptcy estate. (To learn more about what property is in your bankruptcy estate, see Property in Your Bankruptcy Estate.)
One Bankruptcy Dismissal in the Past Year: Stay Lasts 30 Days
With a couple of exceptions, if you had a bankruptcy case pending and dismissed during the previous year for any reason, voluntarily or involuntarily, the court will presume that your new filing is in bad faith, and the stay will terminate after 30 days in your new case. You, the trustee, the U.S. Trustee, or the creditor can ask the court to continue the stay beyond the 30-day period, but the court will do this only if you (or whoever else makes the request) can show that your current case was not filed in bad faith.
Asking the Court to Continue the Stay Beyond 30 Days
The motion to continue the stay must be scheduled for hearing within the 30-day period after you file for bankruptcy and must give creditors adequate notice of why the stay should be extended. This means the motion must:
- be filed within several days after you file for bankruptcy, (unless you obtain an “Order Shortening Time” from the judge, a simple procedure in which you ask the judge to shorten the time between service of the motion on your creditors and the hearing on the motion)
- be served on all creditors to whom you want the stay to apply, and
- provide specific reasons why your current filing is not in bad faith and the stay should be extended.
Factors the Court Will Consider if You Ask it to Extend the Stay
When deciding whether to extend the stay beyond 30 days, the court will look at a number of factors to decide whether your current filing is in good faith. Here are some of the factors that will work against you:
- More than one prior bankruptcy case was filed by (or against) you in the past year.
- Your prior case was dismissed because you failed to file required documents on time (for instance, you didn’t file your credit counseling certificate within 14 days or failed to amend the petition on a timely basis when required to do so). If you failed to file these documents inadvertently or because of a careless error, that won’t help you with the judge—unless you used an attorney in the prior case. Judges are more willing to give debtors the benefit of the doubt if their attorney was responsible for the mistake.
- The prior case was dismissed while a creditor’s request for relief from the stay was pending.
- Your circumstances haven’t changed since your previous case was dismissed.
Two Bankruptcy Dismissals in the Past Year: No Stay
If you had more than two cases pending and dismissed during the previous year, no stay will apply in your current case. You won’t even get the initial 30-day stay that would apply if you had only one bankruptcy case pending within the past year. The only way to get the benefit of the stay is to convince the court, within 30 days of your filing, that your current case was not filed in bad faith and that a stay should therefore be granted. The court will look at the factors outlined above to decide whether you have overcome the presumption of bad faith.
To learn about other exceptions to the automatic stay, see our Bankruptcy's Automatic Stay area.