Should It Stay or Should It Go: The Clash of Canons over Termination of the Automatic Stay for Repeat Filers
One of the most important debtor protections provided by bankruptcy law is the automatic stay, which stops creditors from pursuing collection actions against the debtor. Over time, however, debtors began to abuse the stay by repeatedly filing for bankruptcy each time a creditor tried to foreclose upon them. In response, Congress amended the Bankruptcy Code and added § 362(c)(3)(A), which terminated the stay after 30 days for debtors who had one prior bankruptcy case dismissed within a year of filing. Although the intent of the section is clear, courts have struggled to interpret how it should operate and two main approaches have emerged. The majority approach holds that under § 362(c)(3)(A) the automatic stay terminates only with respect to some creditor actions, which provides a relatively weak deterrent to abusive debtors, while the minority approach calls for total termination of the stay despite the adverse effects on creditors and the chapter 7 trustee. Because both current approaches are unsatisfactory, this Note proposes a novel solution that calls for a legislative redrafting of § 362(c)(3)(A) to clarify ambiguous language and terminate the automatic stay except with respect to property of the estate, but create a presumption in favor of relief from the stay that is rebuttable by a party in interest. This solution would best accommodate all parties involved in a bankruptcy case while also accomplishing Congress’s goal of deterring repeat-filing debtors.
John H. Gibbons