First Circuit Terminates the Stay Entirely as to Repeat Filers

The issue in this case, Smith v. State of Maine Bureau of Revenue Services (In re Smith), 18-1573 (1st Cir. Dec. 12, 2018), is whether the automatic stay terminates after 30 days as to the debtor, or as to the property of the estate for cases where this is the Chapter 13 bankruptcy debtor’s 2nd case pending within 12 months (a repeat filer).

If the stay terminates as to the debtor, then creditors are able to collect from the debtor, as if there was no bankruptcy at all.  They can sue, foreclose, garnish wages, freeze bank accounts etc. to be able to satisfy debts owed to them.

If the stay terminates as to property of the estate, the creditors would then still need to do additional work, (ie. Motion to modify the automatic stay) since the bankruptcy estate is generally not returned to the debtor until the end of the Chapter 13 case.

The First Circuit adopted the position of minority of lower courts regarding Section 362(c)(3)(A), in holding that the stay automatically terminates as to debtor, property of the debtor, and property of the estate. The First Circuit said the statute was poorly worded.  Judge Lynch continued that the BAPCPA amendments were drafted to minimize abuses of the bankruptcy code, and that “is best achieved by interpreting Section 362(c)(3)(A) to terminate the entire stay, including estate property.”  The debtor can extend the automatic stay in their chapter 13 bankruptcy case by showing good faith and a positive change in circumstances.   These are routinely granted absent a clear showing of abuse or no change in circumstances, at lest here in Chicago Bankruptcy Courts.   Thus, Judge Lynch held that “the entire automatic stay” terminates 30 days after filing “as to actions against the debtor, the debtor’s property and property of the bankruptcy estate.”

Smith v. State of Maine Bureau of Revenue Services (In re Smith), 18-1573 (1st Cir. Dec. 12, 2018)