Bankruptcy automatic stay may be lifted (removed) if the debtor fails to perform
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 contains provisions that provide for the automatic lifting of the bankruptcy stay if the debtor does not perform certain duties in a timely manner. Individual Debtors: If a debt is secured by a purchase money security interest, an individual debtor must file a statement of intention within 30 days of filing the petition or at the first meeting of creditors, whichever is earlier. The time period may be extended for cause. The statement of intention must indicate the debtor’s intentions with respect to the secured property (reaffirm, redeem, or surrender). The debtor must perform the intentions within 30 days of the first meeting of creditors. The time may be extended by the court. If the debtor fails to file the statement, or fails to perform the intentions, within the appropriate time period, the stay will automatically terminate and the property that is collateral for the secured loan is no longer property of the estate; accordingly, the creditor may begin repossession proceedings. However, the trustee may oppose this by noticed motion. The stay will not automatically terminate if the debtor’s intentions are to reaffirm the debt on the original contract terms and the creditor will not agree to the reaffirmation on such terms. Individual Chapter 7 Debtors: If the individual is a Chapter 7 debtor, and the debt is secured by property for the debtor’s personal or household use, the debtor must enter into a reaffirmation agreement with creditor, or redeem the property by paying the full amount of the contract. The debtor has 45 days after the first meeting of creditors to reaffirm or redeem the property. If the debtor does not act, the stay lifts and the property that secures the debt is removed from the estate, thus making it vulnerable to the creditor’s collection actions. The trustee may oppose the lifting of the stay by noticed hearing. Serial Filings: If an individual debtor in a Chapter 7, 11 or 13 bankruptcy case had a case dismissed within one year of filing the current petition, the automatic stay will terminate 30 days after filing unless the court finds after hearing upon motion of a party in interest that the refiling was in good faith. The case is presumed not to be in good faith as to any creditor if:
- More than one bankruptcy case under Chapters 7, 11 or 13 was pending in the previous year, and
- The previous case was dismissed because:
- The debtor failed to amend the petition or schedules when ordered by the court without substantial excuse; or
- The debtor failed to provide adequate protection ordered by the court.
- There has not been a substantial change in the debtor’s financial or personal affairs or any other reason to conclude that the later case will not be concluded, if a Chapter 7, with discharge, or if a Chapter 11 or 13, with a confirmed plan that will be fully performed.
If two or more cases pending in the year preceding the current filing were dismissed (other than a dismissal for abuse under §707(b) of the Bankruptcy Code), no stay goes into effect and the court is required to enter an order confirming that the stay is not effective on request of a party in interest. However, the court may impose a stay upon request of a party in interest upon motion to establish the good faith of the current filing. The new stay is subject to the following requirements:
- It must be filed within 30 days of the petition date.
- It is not effective until the date the order is entered.
- The motion must establish the debtor’s good faith in filing the petition.
A small business debtor is defined as a debtor with noncontingent secured and unsecured debts of no more than $2,190,000 (except single asset real estate business). If a small business debtor had a small business case pending within the preceding two years, the stay does not apply unless the court imposes the stay. Certain exceptions apply.