One of the most powerful protections provided by filing a Chapter 13 bankruptcy case is the automatic stay. The automatic stay immediately stops most collection activity, including lawsuits, wage garnishments, repossessions, foreclosures, collection calls, and creditor harassment. For many people, it provides immediate financial relief and the opportunity to reorganize their finances.

However, if you have filed a previous bankruptcy case within the last year, the automatic stay may not apply in the same way it does for first-time filers. In these situations, the Bankruptcy Code contains special rules regarding extending or imposing the automatic stay.

The Automatic Stay in a Typical Chapter 13 Case

When you file your first bankruptcy case (or you have not had another bankruptcy case dismissed within the previous year), the automatic stay generally goes into effect immediately upon filing.

The stay prohibits most creditors from:

• Foreclosing on your home
• Repossessing your vehicle
• Garnishing your wages
• Freezing or collecting bank accounts
• Filing or continuing lawsuits
• Sending collection letters or making collection calls
• Disconnecting utility service for pre-petition debts (subject to certain requirements)

This protection remains in effect throughout your Chapter 13 case unless the bankruptcy court grants a creditor relief from the stay or your bankruptcy case is dismissed.

When Prior Bankruptcy Cases Affect the Automatic Stay

Congress added provisions to the Bankruptcy Code to discourage abusive repeat filings. If you have had one or more bankruptcy cases dismissed during the preceding year, the automatic stay may be limited.

One Prior Case Dismissed Within the Last Year

If you had one bankruptcy case dismissed during the previous one-year period, the automatic stay still goes into effect when you file your new Chapter 13 case.

However, the stay automatically expires 30 days after filing unless the bankruptcy court extends it.

This is governed by 11 U.S.C. § 362(c)(3).

If you do nothing, creditors may resume collection activities after the 30th day.

Motion to Extend the Automatic Stay

To keep the automatic stay in place, your attorney should promptly file a Motion to Extend the Automatic Stay.

Because the stay expires automatically after 30 days, timing is critical.

Generally:

• The motion should be filed immediately after filing the bankruptcy case.
• A hearing must usually be held before the 30-day deadline.
• The debtor must prove the new bankruptcy case was filed in good faith.

What Does “Good Faith” Mean?

The court wants to determine whether the new Chapter 13 case has a genuine chance of success.

Factors that may demonstrate good faith include:

• A significant increase in income
• Obtaining new employment
• Reduction in household expenses
• Resolution of prior medical issues
• Correction of problems that caused dismissal of the previous case
• Ability to make Chapter 13 plan payments
• Honest and complete bankruptcy schedules

If the prior case was dismissed simply because temporary financial difficulties prevented plan payments, and those problems have now been resolved, courts are often willing to extend the stay.

Two or More Cases Dismissed Within One Year

The rules become much stricter if you had two or more bankruptcy cases dismissed during the previous year.

Under 11 U.S.C. § 362(c)(4), no automatic stay goes into effect at all when the new Chapter 13 case is filed.

Without court intervention:

• Creditors may continue foreclosure proceedings.
• Vehicle repossessions may proceed.
• Wage garnishments may continue.
• Lawsuits may move forward.

Motion to Impose the Automatic Stay

When no stay arises because of multiple prior dismissals, your attorney may file a Motion to Impose the Automatic Stay.

Unlike an extension motion, this asks the bankruptcy court to create an automatic stay that otherwise would not exist.

The debtor again must establish that the new bankruptcy filing is made in good faith and that circumstances have changed sufficiently to justify bankruptcy protection.

Evidence Often Presented

Courts frequently consider evidence such as:

• Affidavits from the debtor
• Updated income information
• Pay stubs
• Tax returns
• Medical records (when applicable)
• Employment changes
• Proof that previous filing problems have been corrected
• A feasible Chapter 13 repayment plan

The stronger the evidence showing that the current case is likely to succeed, the greater the likelihood the court will grant the motion.

Why Were the Earlier Cases Dismissed?

The reason for dismissal often plays an important role.

For example, a prior case dismissed because:

• Required documents were not timely filed
• Temporary unemployment occurred
• Medical emergencies interrupted payments
• A short-term financial hardship arose

may be viewed more favorably than repeated dismissals caused by bad-faith filings or repeated failure to comply with court orders.

Timing Is Extremely Important

These motions involve strict deadlines.

If a Motion to Extend the Automatic Stay is not filed and heard within the required time period, valuable protections may be permanently lost.

Likewise, if no automatic stay exists because of multiple prior dismissals, creditors may continue collection efforts until the court grants a Motion to Impose the Stay.

Waiting even a few days before consulting a bankruptcy attorney can significantly affect your rights, especially if a foreclosure sale or vehicle repossession is imminent.

Foreclosure Situations

These motions are particularly important when homeowners are attempting to save their homes.

Without an effective automatic stay:

• Mortgage foreclosure sales may proceed.
• Sheriff’s sales may occur.
• Creditors may continue eviction proceedings after foreclosure.
• Mortgage companies are not required to delay collection efforts.

Obtaining an extension or imposition of the stay may provide the time needed to propose and complete a Chapter 13 repayment plan that cures mortgage arrears over time.

Experienced Legal Representation Matters

Cases involving prior bankruptcy dismissals require careful planning and prompt legal action. The facts surrounding the earlier dismissals, your current financial circumstances, and the timing of the new filing can all affect whether the court will extend or impose the automatic stay.

An experienced Chapter 13 bankruptcy attorney can evaluate your prior bankruptcy history, determine whether a motion is necessary, prepare the required evidence, and present your case to the bankruptcy court.

Contact the Law Offices of Walter Metzen

If you have previously filed bankruptcy and are considering filing another Chapter 13 case, do not assume you are automatically protected by the automatic stay. Whether the stay is fully effective may depend on your bankruptcy history and prompt action after filing.

At the Law Offices of Walter Metzen, I have helped thousands of individuals throughout Metropolitan Detroit navigate complex Chapter 13 bankruptcy issues, including motions to extend and impose the automatic stay. If you are facing foreclosure, repossession, wage garnishment, or other creditor actions after a prior bankruptcy dismissal, contact my office as soon as possible. The sooner we begin evaluating your case, the more options may be available to protect your property and help you achieve a successful financial fresh start.