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Document Index: 88804978

Matched Legal Cases: ['§362', '§362', '§362', '§362', '§362', '§362', '§707', '§362', '§362', '§362', '§541', '§1306', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362', '§362']

American Bankruptcy Institute | LEGISLATIVE UPDATE: 30-Day Lifting of the Automatic Stay under §362(c)(3)(A): Not What It Purports to Be (citation: ABI Journal, Vol. XXV, No. 3, p. 10, April 2006)
Web posted and Copyright © April 1, 2006, American Bankruptcy Institute.
Bell, Davis & Pitt, P.A.; Winston-Salem, N.C.
dbruton@belldavispitt.com
30-Day Lifting of the Automatic Stay under §362(c)(3)(A): Not What It Purports to Be
he Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) has been touted as a mechanism to prevent abusive bankruptcy filings by individual debtors. One of the specific "abuses" that Congress sought to limit was the practice of repeat filing through revised §362(c)(3)(A). At first blush, §362(c)(3)(A) purports to lift the automatic stay as to secured or leased property within 30 days after the filing of a bankruptcy petition if the debtor was dismissed from a previous bankruptcy case within one year of the filing of the existing case. Of course, when it comes to the lexical prestidigitation of statutory construction, few things are ever what they first appear to be. BAPCPA has barely been in effect for four months, and two recent bankruptcy opinions have already ripped the teeth out of the 30-day stay-lifting provision of §362(c)(3)(A). Newly enacted §362(c)(3)(A) provides as follows: (c) Except as provided in subsections (d), (e), (f) and (h) of this section— (3) if a single or joint case is filed by or against a debtor who is an individual in a case under chapter 7, 11 or 13, and if a single or joint case of the debtor was pending within the preceding one-year period but was dismissed, other than a case refiled under a chapter other than chapter 7 after dismissal under §707(b)— (A) the stay under subsection (a) with respect to any action taken with respect to a debt of property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case. In subsection (B), the statute goes on to outline circumstances where a debtor can move to continue the automatic stay beyond the 30-day drop-dead period.
In the recent decision of In re Johnson, 335 B.R. 805 (Bankr. W.D. Tenn. 2006), a repeat filer moved to extend the automatic stay with respect to his home beyond the 30-day drop-dead period pursuant to §362(c)(3)(B). The bankruptcy court determined that the debtor's motion was, in essence, a superfluous act because, as far as the court was concerned, the automatic stay was not eviscerated after 30 days following the bankruptcy filing. In rendering its decision in this regard, the bankruptcy court focused on the specific language of §362(c)(3)(A). More particularly, the court noted that §362(c)(3)(A) dictates that the 30-day time limit only applies to "debts" or "property of the debtor" and not to "property of the estate" as long as the subject property remains "property of the estate." Id. at 806. Noting that the debtor's residence was unquestionably property of the bankruptcy estate, the court determined that the debtor's request to extend the automatic stay beyond the 30-day drop-dead period was a futile act. The court wrote that the automatic stay did not terminate with respect to the debtor's home on the 30th day following the bankruptcy filing, but that the stay remained in effect until the debtor's case is dismissed or discharged or until the court orders otherwise. The court concluded its opinion by admonishing that "[a]ny creditor seeking to foreclose or repossess property which is by statute 'property of the estate' must file an appropriate motion seeking relief from the automatic stay. If creditors take any action against such property without first seeking relief, they may be violating the stay." Id. at 807. If the analysis in Johnson is correct, given the expansive definition of "property of the estate" under §541 (and §1306 in chapter 13 cases), one wonders if the drop-dead provision of §362(c) (3)(A) would ever have any real effect. One possibility may be when specific property is exempted. Pursuant to well-established case law, property that is exempted ceases to be property of the bankruptcy estate.1 Thus, it would appear that if certain property is exempted by a debtor, then the rationale in Johnson would not apply, and the 30-day drop-dead provision of §362(c)(3)(A) would act to terminate the automatic stay as to such property after the 30-day limitation period has expired. Interestingly, a review of the debtor's bankruptcy schedules in Johnson reveals that the debtor did in fact exempt his home. However, the Johnson court apparently did not consider this fact when rendering its decision. Statutory flyspecking has also substantially limited the impact of §362(c)(3)(A) in the Eastern District of North Carolina. In In re Paschal, 2006 WL 258298 (Bankr. E.D.N.C. 2006), as in Johnson, a chapter 13 debtor brought a motion to extend the 30-day drop-dead provision of §362(c)(3)(A). Although acknowledging that the legislative history "suggests" that in enacting §362(c)(3)(A), Congress intended to "terminate all of the protections of the automatic stay" Id. at *3 (emphasis in original), the bankruptcy court wrote that the statute was a "puzzler," and that the particular language of the statute failed to accomplish Congress' desired end. In Paschal, the particular statutory phrase that intrigued the bankruptcy court was the phrase "action taken." As outlined above, §362(c)(3)(A) lifts the automatic stay as to "any action taken with respect to a debt of property...." The debtor cleverly argued that under the literal language of §362(c)(3)(A), the stay only terminates with respect to "actions taken" by creditors prior to bankruptcy. The debtor contended that since there were no "actions taken" against the debtor by any creditor prior to the filing of her current bankruptcy case, no protection provided by the automatic stay could be terminated by §362(c)(3)(A). In considering the debtor's argument, the bankruptcy court looked to §362(c)(4)(A)(i). That statute provides that if a debtor is dismissed from two bankruptcy cases in the prior year and a third case is filed, then "the stay under subsection (a) shall not go into effect upon the filing of the later case." The bankruptcy court reasoned that if Congress wanted to terminate the stay of all protections of the automatic stay in §362(c)(3)(A), it could have easily used language similar to that in §362(c)(4)(A)(i). Due to the different language regarding the abridgement of the automatic stay in the same Code section, the court concluded that §362(c)(3)(A) is not as broad as §362(c)(4)(A)(i), and that all of the protections of the automatic stay are not eliminated by §362(c)(3)(A). Id. at *4. In examining the phrase "action taken" in §362(c)(3)(A), the court also looked to other subsections of §362. The court noted that the "act" and the term "action taken" are not synonymous and that the difference is "significant." The court explained:
The term "act" is much broader than the term "action taken." The term "act" is used in several subsections of the automatic stay; specifically, the term "act" appears in §362(a)(3) ("any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate"), §362 (a)(4) ("any act to create, perfect or enforce any lien against property of the estate"), §362(a)(5) ("any act to create, perfect or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title"), and §362(a)(6) ("any act to collect, assess or recover a claim against the debtor that arose before the commencement of the case under this title").
The term "action" also appears in a subsection of the automatic stay. Section 362(a)(1) provides that the stay operates to prohibit (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title[.]" As used in §362(a)(1), the term "action" contemplates a formal judicial, administrative or similar undertaking. The use of the term "action" in §362(b) also connotes formal activity. The term "action" appears in §362(b)(1) ("commencement or continuation of a criminal action or proceeding"); §362(b)(2)(A) ("commencement or continuation of a civil action or proceeding"); §362(b)(4) ("action or proceeding by a governmental unit or any organization exercising authority under the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction"); §362(b)(8) (action to foreclose by Secretary of Housing and Urban Development); §362(b) (14) ("action by an accrediting agency"); §362(B)(15) ("action by a state licensing body"); §362(b)(16) (action by a guaranty agency defined by Higher Education Act of 1965); and §362(b)(22) (continuation of eviction action); and §362(b) (25)(A) and (B) (action by securities self regulatory organization). "Action" also appears in §362(c)(3)(C)(ii), referring to commencing an action under subsection 362(d), a formal motion for relief from the automatic stay.,
Id. at *5(emphasis in original). Based on the above, the court concluded that the term "action" in §362(c)(3)(A) means a formal action such as a judicial, administrative, governmental, quasi-judicial or other formal activity or proceeding. The court held that because no "actions" were taken against the debtor pre-bankruptcy, no protections of the automatic stay were terminated under §362(c)(3)(A). Id. at *6. Based on the plain language of §362(c)(3)(A), the analyses adopted by the Johnson and Paschal courts are not without support. Do those decisions dovetail with the likely intentions of Congress in enacting BAPCPA and, more specifically, §362(c)(3)(A)? The answer is subject to legitimate debate. One thing that is certain is that Johnson and Paschal are only the tip of the iceberg. BAPCPA is clearly replete with "puzzlers" that are far more enigmatic than §362(c)(3)(A). Curbing bankruptcy abuse may well have been the desired end of Congress in enacting BAPCPA, but it remains to be seen whether the judicial interpretations of BAPCPA serve that end. Footnotes
1 See, e.g., In re Dolen, 265 B.R. 471, 487 (Bankr. M.D. Fla. 2001) (when a debtor claims exempt property, the property is removed from property of the estate); In re Soost, 262 B.R. 68, 72 (8th Cir. BAP 2001) ("exempted property is no longer part of the bankruptcy estate").