Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
By Diane Davis
Dec. 9 — New York Liens, LLC RAI Custodian, a secured creditor that holds a tax lien against a debtor’s property for unpaid general and school taxes, can move forward to collect its debt because the automatic stay in the debtor’s bankruptcy case has ended ( In re Bender , 2016 BL 405522, Bankr. E.D.N.Y., No. 816-73280-reg, 12/6/16 ).
Judge Robert E. Grossman of the U.S. Bankruptcy Court for the Eastern District of New York Dec. 6 ruled in favor of the creditor and determined that the automatic stay terminated 30 days after the debtor’s second bankruptcy filing by operation of Bankruptcy Code Section 362(c)(3)(A).
That provision isn’t clear, and there are majority and minority positions on the issue. The bankruptcy court’s decision is interesting because it found “inherent flaws in both the majority and minority’s reasoning and holdings.”
Section 362(c)(3) “limits the duration of the automatic stay in a Chapter 7, 11, or 13 case filed by an individual debtor who has had one bankruptcy case dismissed within the one-year period preceding the date the later petition is filed,” according to Bloomberg Law: Bankruptcy Treatise, pt. 1, ch. 45 (D. Michael Lynn et al. eds., 2016). "[I]f a debtor files a bankruptcy case within a year after dismissal of a prior case, the automatic stay expires on the 30th day after the later case is filed, unless extended,” the Treatise states.
“The provision was designed to combat the acts of ‘serial filers,’ who file petitions to stop foreclosure, without reasonable prospects of financial rehabilitation,” according to the Treatise.
Debtor Tracey Bender urged the court to adopt the reasoning of the majority that the automatic stay terminates on the 30th day after the filing of the petition, but only “with respect to the debtor” and the debtor’s property. In the minority view, the stay terminates in its entirety with respect to the debtor, the debtor’s property and estate property, upon expiration of the 30 days, the court said.
The bankruptcy court took a different approach and focused on specific actions with respect to specific property, not the broader categories of property of the estate or property of the debtor. Thus, the “stay is lifted ‘with respect to a debt or property securing such debt’ and with respect to leases — regardless of whether the property or the lease is property of the estate or property of the debtor,” the court said. Limiting the effect of Section 362(c)(3)(A) to the debtor or property of the debtor would limit its effectiveness and not support congressional intent to protect the secured creditor or lessor seeking to continue judicial, administrative or other proceedings commenced prepetition, the court said.
A “two time repeat filer” can’t gain protection from the automatic stay, the court said, but can ask the court to impose the stay by demonstrating that the filing of the second case was made “in good faith as to the creditors to be stayed.” The debtor must overcome a presumption that the second case wasn’t filed in good faith, the court said.
The court agreed with In re Paschal, 337 B.R. 274 (Bankr. E.D.N.C. 2006), that under Section 362(c)(3), the Section 362(a) stay is “only terminated as to the continuation of judicial, administrative or other proceedings commenced prior to the bankruptcy filing.”
Richard F. Artura, Phillips, Artura & Cox, Lindenhurst, N.Y.; Adam C Gomerman, Huntington Station, N.Y., represented debtor Tracey E. Bender, aka Tracey B. Vitagliano.
Chapter 13 trustee Michael J. Macco, Islandia, N.Y.
To contact the reporter on this story: Diane Davis in Washington, D.C. at DDavis@bna.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)