Wading into the disagreement among courts about the scope of the automatic termination of the stay with respect to repeat filers, Bankruptcy Judge Robert E. Grossman of Central Islip, N.Y., decided there is “an inherent flaw in both the majority and minority reasoning.” His interpretation of Section 362(c)(3)(A), focusing on different parts of the statute, terminates the stay as to the debtor, property of the debtor, and property of the estate.
If a debtor’s case was dismissed within a year, the automatic stay terminates 30 days after the new filing “with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease....”
The majority interpret the statute narrowly to mean that the stay does not terminate with regard to property of the estate, only as to the debtor or property of the debtor. The minority read the same words differently to conclude that the stay evaporates 30 days after the subsequent filing as to the debtor, the debtor’s property and property of the estate.
In his Dec. 6 opinion, Judge Grossman correctly pointed out that the majority view represents a “hollow victory” for secured creditors since most of a debtor’s property will become property of the estate in chapter 7, aside from exempt property and wages earned after filing. In chapter 13, the automatic termination of the stay is even more limited because after-acquired property comes into the estate.
Judge Grossman said that both the majority and minority focus only on the phrases “property of the debtor” and “property of the estate.” Instead, Judge Grossman believes the important phrase is “the stay under subsection (a)” of Section 362. Emphasizing that phrase, he concludes that the “wholesale reference to subsection (a),” rather than to any of the eight subparts of subsection (a), means that the stay automatically ends as to the debtor, the debtor’s property, and property of the estate.
Judge Grossman admits that his interpretation makes some language in the statute superfluous, but, citing authorities, he said that while “language surplus is not favored, it is permissible.”
We recommend reading Judge Grossman’s opinion in full to understand his analysis. For ABI’s discussion of recent opinions reflecting the majority and minority views, click here and here, respectively.