The split among the lower courts widens on the automatic termination of the automatic stay as to property of the estate belonging to a repeat filer.
In the case of an individual whose prior bankruptcy was dismissed within a year of a new filing, Section 362(c)(3)(A) automatically terminates the stay in 30 days “with respect to the debtor.” District Judge William R. Sawyer of Montgomery, Ala., took sides with the majority by holding that the stay does not also terminate automatically with regard to estate property.
Judge Sawyer’s Aug. 25 opinion admirably lays out and analyzes decisions going both ways. No circuit court has tackled the question, but three district courts and the First Circuit Bankruptcy Appellate Panel are in the majority by holding that the stay evaporates automatically only with respect to property of the debtor.
Led by the Ninth Circuit B.A.P.’s opinion in In re Reswick, the minority find the statute ambiguous and hold that the stay terminates as to both the estate’s and the debtor’s property.
Although he followed the majority, Judge Sawyer conceded that terminating the stay only with regard to the debtor’s property makes the statute “relatively toothless” against repeat filers. In practical effect, a repeat filer can be evicted under the majority’s opinions, but can retain an automobile that is property of the estate.
In an opinion that is debtor-friendly in substance, Judge Sawyer said that the plain meaning of the statute is “unambiguous but not absurd.” He therefore declined to correct what may have been a drafting error by Congress.
To read ABI’s analysis of Vitalich v. Bank of New York Mellon, where a district judge in the Northern District of California took sides with the minority earlier this month, click here.