Connecticut District Court and Bankruptcy Court Differ on Extent to Which the Automatic Stay Automatically Terminates Upon Second Bankruptcy Filing

by Pullman & Comley, LLC
Contact

Under §362(c)(3)(A), when a debtor files a second bankruptcy case within one year after the first case, the automatic stay in the second case will automatically terminate “with respect to the debtor” on the 30th day of the case unless, within that 30 day period, the debtor files a motion to extend the stay and the bankruptcy court grants it.  The District Court ruled this past April in Chekroun v. Weil (Weil), No. 3:12-cv-462 (D.Conn. April 29, 2013) that §362(c)(3)(A) terminates just with respect to the debtor, but not with respect to property that remains property of the estate.  Thus, under this decision, acts against property that has not been abandoned by the estate as of the 30th day of the case will remain subject to the automatic stay notwithstanding §362(c)(3)(A).

In Weil, the debtor filed a motion to extend the stay after a second bankruptcy case was filed in order to stay the completion of a foreclosure action against certain of his real property.  However, the Bankruptcy Court (Shiff, J.) did not hold a hearing on the motion until months later, at which time it was granted.

The secured creditor appealed on the ground that by the time the hearing was held, the stay had already expired by operation of § 362(c)(3)(A).  Although the district court agreed that the stay terminated, it was pyrrhic victory for the secured creditor because the court read § 362(c)(3)(A) literally to provide that the stay terminates just “with respect to the debtor,” not with respect to property that remains property of the estate.  Because the secured creditor’s mortgage foreclosure action pertained to property that was still property of the estate, the court held that the automatic stay of acts against that property, specifically the property against which the secured creditor held a mortgage, did not automatically terminate under § 362(c)(3)(A).  Under these circumstances, it described the bankruptcy court’s untimely order extending the stay as “ineffective,” but then explained that “as a practical matter, . . . [it was] also largely unnecessary and legally harmless.”

The district court’s reading of § 362(c)(3)(A) essentially renders the limited 30-day stay meaningless for all secured creditors since, as a practical matter, their collateral will remain property of the estate until abandoned, which is not likely to occur until well after the 30-day period expires.

In the recent decision of In re Wilson 2014 WL 183210 (Bankr. D. Conn. Jan. 15, 2014), the Bankruptcy Court (Dabrowski, J.) disagreed with the holding in Weil and instead concurred in and adopted the reasoning of the 9th Circuit Bankruptcy Appellate Panel in In re Resnick, 446 B.R. 362 (9th Cir. BAP 2011), which found that §362(c)(3)(A) terminated the automatic stay in its entirety on the 30th day after the petition date unless the stay was extended by the bankruptcy court within the 30-day period.

In Wilson, the debtor had filed three previous bankruptcy proceedings in order to stay foreclosure proceedings against his real property.  A fourth case was filed on May 16, 2013 and on May 22, the debtor filed a motion to extend the stay which was denied on June 13, 2013.

Nevertheless, the secured creditor filed a motion for relief from stay in response to the debtor’s assertion that, as a result of the Weil decision, 362(c)(3)(A) terminated the automatic stay only with respect to the debtor and not with respect to property of the estate.  Relying on the Resnick decision, the bankruptcy court concluded that in light of the denial of the debtor’s motion to extend it, the automatic stay terminated in its entirety on June 15, 2013 by operation of §362(c)(3)(A).  In accordance with this determination, the bankruptcy court found that the motion for relief from stay was unnecessary, as the secured creditor had been, since June 15, 2013, free to commence, continue and prosecute to judgment the pending foreclosure action.In rendering his decision, the bankruptcy court acknowledged that the majority of the courts to address this issue conclude that §362(c)(3)(A) terminates the automatic stay only with respect to the debtor and not with respect to the property that remains property of the estate.  The decision is a clear victory for secured creditors who will now have a greater chance of not being held hostage in the bankruptcies of serial filers.

An interesting side issue that went unmentioned in Wilson is whether the bankruptcy court, as a unit of the district court, was bound to follow Judge Underhill’s decision in Weil  even though the bankruptcy court disagreed with it.  Although there is a split of authority nationally as to whether the decision of a single district court judge in a multi-judge district is binding on a bankruptcy court in the same district, Judge Dabrowski has ruled on two previous occasions that the bankruptcy court is not so bound.  See In re Koper, 284 B.R. 747, 755 (Bankr. D. Conn. 2002); In re Carrozella & Richardson, 255 B.R. 267, 272 (Bankr. D. Conn. 2000).

[View source.]

Written by:

Pullman & Comley, LLC
Contact
more
less

Pullman & Comley, LLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.