The automatic stay protects you and your property from your creditors when you file bankruptcy. But you can lose that key benefit of bankruptcy under certain rare circumstances. Because those circumstances are at least in part under your control, this blog will help you avoid them.
In our last blog we wrote about the automatic stay, and listed four special classes of debts or legal procedures which are excluded from the protection of the automatic stay—criminal fines and fees, certain domestic relations proceedings, child and spousal support, and certain procedures by the taxing authorities. But today we’re talking about a situation in which the automatic stay doesn’t just fail to apply to some specific creditors. It does not get triggered by the filing of your case AT ALL, as to ANY of your creditors. Or 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 circumstances that you absolutely want to avoid?
As the title of this blog indicates, these dangerous circumstances involve previously filed bankruptcy case(s) filed in your name within one year before the filing of your new bankruptcy case. So if you have not had any prior bankruptcy cases filed within the last year, which were then dismissed, then you don’t need to worry about this.
But before you stop worrying, be careful: think back over the last year and make sure about this. Sometimes people file a bankruptcy on their own, thinking that they can handle it without an attorney, or because there is some creditor emergency. Then they fail to finish the paperwork or pay the filing fee or show up to the hearing, so their case gets dismissed. A few months later they figure they didn’t “really file” because the case never got anywhere. Or a similar thing might happen if you were represented by an attorney but there was not good communication between you and the attorney’s office, resulting in a case getting filed and then dismissed. If there is any realistic chance that either of these occurred for you, be sure to tell us so we can check the court records.
So here are the rules about this:
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 MAY go into effect AFTER the case is filed, but only if the bankruptcy judge is convinced that certain standards have been met.
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 EXPIRES 30 days after the filing date, unless the bankruptcy judge is convinced that certain standards have been met before then.
The purpose of these rules was to stop “serial bankruptcy filers,” those who filed multiple bankruptcy cases. This was usually done to repeatedly delay a foreclosure or some other creditor action, which was seen as an abuse of the bankruptcy process. The specific standards which would then have to be met to convince the judge to impose or preserve the automatic stay are beyond the scope of this blog, but have to do with proving the lack of such abuse. They involve justifying why the previous case(s) was (were) dismissed, and/or showing how your circumstances have changed so that the present case won’t get dismissed.
Again, these circumstances don’t often occur. But since the consequences can be very harsh, be sure you talk with us about any possible prior bankruptcy filings at the very beginning of our first meeting.