Creditors and Debtors Beware of What Property Is Subject To The Expiration of the Bankruptcy Automatic Stay Following a Prior Bankruptcy Dismissal
The Bankruptcy Code provides that if a Debtor had a prior dismissed bankruptcy case within 1 year from filing a new bankruptcy case, the automatic stay expires 30-days from the filing of the new case unless the Debtor seeks an extension of the automatic stay from the Court within the first 30 days. However, the issue is whether the termination of the automatic stay only applies to “property of the debtor” as the majority of Courts have held, or whether it applies to “property of the debtor” and “property of the bankruptcy estate” which is in the minority view. The split of authority on this issue all deals with the interpretation of the phrase “with respect to the debtor” as contained in 11 USC 362(c )(3)(A). The majority believe the plain language used applies only to the debtor’s property, while the minority believe the phrase is ambiguous and the plain language rule does not apply and Congress intended to terminate the stay in its entirety.
Based on this split of authority, a creditor should always seek an order from the bankruptcy court determining whether or not the stay is terminated and as to what property before taking any action so as not to violate the automatic stay.