If you filed two bankruptcy cases in the last year that got dismissed, you need to ask the court to now get the protection of the “stay.”
The Non-Automatic Automatic Stay
Imagine if you filed a bankruptcy case but after doing so your creditors could still legally continue collecting on your debts.
Our last blog post referred to losing the protection of the automatic stay 30 days after filing a bankruptcy case. This happens if a prior bankruptcy was filed within a year and dismissed (closed), unless before those 30 days expire the debtor satisfactorily explains to the bankruptcy court why a prior case was dismissed and why a new one should be permitted.
That’s what happens if ONE prior bankruptcy case was filed within a year and dismissed. But if TWO (or more) bankruptcy cases were filed and dismissed within a year, then no automatic stay goes into effect at all—not even for 30 days. Instead the debtor must file a motion asking for the automatic stay to be imposed on all the creditors, and this will occur only if certain conditions are met. Also, this motion must be filed within 30 days after the filing of the case.
How could two cases be filed and dismissed within a year, and a new case filed, for this situation to apply? The following example illustrates this, plus shows the kinds of conditions which must be met to impose the automatic stay
Let’s add a twist to the example in the last blog post. There Kate was sued by a collection agency a year ago, and quickly filed a “skeleton” Chapter 7 “straight bankruptcy” case on her own, without an attorney—completing just enough paperwork to start the case. Later the same day, Kate heard from the collection agency before it knew about her bankruptcy filing, and she accepted a settlement offer from the agency allowing her to make very small monthly payments. Her bankruptcy case was dismissed a few weeks later after Kate missed a deadline to file the remaining bankruptcy documents.
The factual twist is that two months later when Kate was dealing with a threatened home foreclosure she went to see an attorney, who filed a Chapter 13 case on her behalf to stop that foreclosure. But Kate decided a few days later to surrender the home, and did not follow through with her attorney. The attorney sent her emails and several letters about the next deadlines, all of which Kate disregarded because she preferred not to file bankruptcy. This Chapter 13 case was also dismissed a few days later because of Kate’s failure to meet document-filing deadlines.
With both of these situations, in her own mind Kate understood—or rather, misunderstood–that because she never followed through and never received any benefits of filing bankruptcy, she had not really filed a bankruptcy case.
So it’s now another 6 months after her Chapter 13 case was filed to stop the foreclosure. In the meantime, Kate was in an automobile accident which seriously injured her, caused by the other driving, whose insurance coverage was inadequate to pay for much of Kate’s costs.
So she Kate decides she really needs to file some kind of bankruptcy case. She sees a new attorney, and tells her that she’s not filed a bankruptcy case within the last year. Fortunately this attorney is thorough and independently finds out about the two prior bankruptcy filings. She tells Kate that because of that if she filed a bankruptcy case now she would have no immediate protection.
Her attorney told Kate that she had two main choices. She could either wait until more than 365 days had passed since the prior cases, or she could file now and ask the bankruptcy court to impose the stay as soon as possible after the case was filed.
Kate was also told that because of her changed circumstances since her last bankruptcy filing—the automobile accident and the substantial new debt related to it—the likelihood that the automatic stay would be imposed to protect her was quite high. Because Kate didn’t want to wait months more before filing, she decided to file a Chapter 7 case now and immediately ask the court to impose the automatic stay.
So her Chapter 7 bankruptcy case was filed, along with a motion to impose the automatic stay. The motion was granted, protecting Kate from all of her creditors during the course of her Chapter 7 case.