Section 362(c) of the Bankruptcy Code governs termination of the automatic stay.  Under Section 362(c)(3)(A) of the Bankruptcy Code, if a debtor had a case pending within the preceding one-year that was dismissed, then “[t]he stay under Section (a) with respect to any action taken with respect to a debt or property securing such debt, or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the latter case[.]”

There is an issue as to whether the 30-day automatic stay for repeat bankruptcy filers lapses entirely when that time runs or terminates solely as to the debtor and his property but not as to the bankruptcy estate’s property.  What has been described as a minority view has concluded that Section 362(c)(3)(A) terminates the automatic stay in its entirety, i.e., with respect to both the debtor and property of the estate.  These courts, such as In re Curry, 362 B.R. 394, 400-01 (Bankr. N.D.Ill. 2007), reason that the phrase “with respect to the debtor” is ambiguous because it runs contrary to the larger statutory scheme.  They reason that the phrase “property of the estate” incorporates virtually all property.  Only property that is abandoned or exempt is otherwise excluded from the definition “property of the estate.”  Therefore, the minority position posits that if the phrase “with respect to the debtor” is read to refer only to the debtor and the debtor’s property, then the rest of the sentence which reads “the stay * * * with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate” does not make sense and the phrase is superfluous.

This minority approach was adopted in In re Daniel, 404 B.R. 318 (Bankr. N.D.Ill. 2009).  Here, the court stated that the phrase “with respect to the debtor” imposed no limitation, but merely emphasized that it applied to the termination of the automatic stay in “the debtor’s” case. Id. at 324.  The stay would terminate both as to the debtor and the debtor’s property (estate and non-estate) and would allow “any action” against property securing a debt to proceed.  The court noted that this, in turn, would make meaningful the right of parties in interest to seek an extension of the stay, so as to prevent secured creditors from exercising rights against estate property that could be used to satisfy their claims.  Daniel noted that the National Bankruptcy Review Commission, created by Congress in 1994, considered it a problem that debtors were filing successive bankruptcy cases to exploit the automatic stay.  The Commission responded to this problem by suggesting that the automatic stay not go into effect with respect to certain successive filings of bankruptcy cases.  In such cases, “no creditor actions would be halted, unless the court subsequently ordered that a stay be imposed,” and so debtors would be discouraged “from filing a non-meritorious * * * petition on the eve of a foreclosure sale merely to stay the sale * * * *”  This objective is only achieved if Section 362(c)(3)(A) were to apply to estate assets and well as assets of the debtor. Id. at 327.

Daniel also noted that Section 362(c)(3)(A) would largely be meaningless if the majority approach were followed:

The expansion, however, has little practical effect.  Because all property that the debtor owned before filing bankruptcy is either part of the estate or exempt, the estate-property exclusion would only allow a judgment to be enforced against a Chapter 7 debtor’s post-bankruptcy earnings and acquisitions, and only until the debtor received a discharge, which usually happens within 80 to 100 days after the bankruptcy filing.  In Chapter 13, the expansion would have no effect whatever, because any property the debtor acquired after the filing of the case would be estate property under §1306(b).  In cases under either chapter, the estate-property exclusion would not allow a secured creditor like Deutsche Bank, holding a lien on the debtor’s pre-bankruptcy property, to continue a foreclosure proceeding or take any other action to enforce its lien.

Id. at 323.

This position was also followed in In re Dev, 593 B.R. 435 (Bankr. E.D.N.C. 2018).  First, the court found the analysis in In re Jupiter, 344 B.R. 754, 762 (Bankr. D.S.C. 2006) compelling.  The Jupiter court believed that under Section 362(c)(3)(A), the operative and controlling word is that the stay under  Section 362(a) “terminates,” and the remaining language of “with respect to the debtor” defines which debtor is affected by the provision, because “in a joint case, a ‘debtor’ may not necessarily mean both debtors if one debtor did not have a case dismissed within the year prior to the current petition date.” Id.  This was elaborated upon in Reswick v. Reswick (In re Reswick), 446 B.R. 362, 366 (9th Cir.BAP 2011) which stated that “[b]ecause section 362(c)(3) begins by referencing either a ‘single or joint case,’ the language ‘with respect to the debtor’ in section 362(c)(3)(A) simply distinguishes between the debtor and the debtor’s spouse.” Id. at *7.

Dev further noted that to limit the effect of  Section 362(c)(3)(A) to the debtor or property of the debtor would limit its effectiveness and not support congress’s intent to protect secured creditors or lessors seeking to continue judicial, administrative or other proceedings commenced prepetition with respect to debts, property securing such debts or leases. Id. * 8.  “Congress could not have intended an exception that would swallow the rule.” Id.  Looking at the legislative history, the court then stated:

The House and Senate reports for their respective bills are similar to the legislative history for BAPCPA and do not contain any distinctions between actions against the debtor, the debtor’s non-estate property, and the debtor’s estate property.  By tracing the origins of what finally became §362(c)(3)(A), the Daniel court concluded reasonably that this provision “was intended to stop the bad faith successive filing of bankruptcy cases from interfering with real estate foreclosures.  This purpose would not be advanced by a provision that left the stay in effect as the debtor’s pre-bankruptcy real estate.”

Id. at *9.  The court, however, citing to In re Paschal, 337 B.R. 274 (Bankr. E.D.N.C. 2006) provided the caveat that in comparing the phrase “action taken,” to the word “action” and the broader term “act” used in other subsections of  Section 362:

the term “action” means a formal action, such as a judicial, administrative, governmental, quasi-judicial, or other essentially formal activity or proceeding. Furthermore, the action with respect to which the stay terminates is an “action taken,” which means an action in the past, prior to the filing of the debtor’s bankruptcy petition.

Id. at *5 (quoting Paschal, 337 B.R. at 280).

Therefore, the stay was terminated only with respect to actions taken pre-petition.  Dev stated that this interpretation was logical, because creditors who have spent time and money to initiate a legal process, which is frustrated by repeated bankruptcy filings, should be protected over those who have not expended such resources.  “Following this analysis, Mr. Dev’s equitable distribution action and CFCU’s foreclosure proceeding, each initiated pre-petition, are the types of ‘actions taken’ which the automatic stay terminates under §362(c)(3)(A).” Id. at *5.

In re Smith, 910 F.3d 576 (1st Cir. 2018) also followed this so-called minority position.  The court started by stating that the phrase “with respect to the debtor” was not plain.  It found that one of the “primary obstacles to the majorities interpretation of the phrase “with respect to the debtor” is that it is most naturally read to terminate the stay only for actions against the debtor and not, as the court read it, for actions against both the debtor and the debtor’s property. Id. at 582.  Smith also noted that Section 362(c)(3)(A) is not an exemplar of precision.  The court stated that this provision is a collection of “with respect to” phrases, and it is not obvious how the phrases relate to each other, or how the phrases connect to other related provisions.  Given this fact, it stated that it needed to follow the Supreme Court’s warning to be careful about “rigorous application of the canon[s]” where a provision may be “inartful[ly] drafted.”  Id. at 582 (quoting King v. Burwell, — U.S. –, 135 S.Ct. 2480, 2492, 192 L.Ed.2d 483 (2015).  The court stated that the more sensible interpretation of §362(c)(3)(A) was that it applied to all property, stating:

The automatic stay operates differently for first-time, second-time, and subsequent filers.  For first-time filers, the stay is automatic and permanent, at least until the bankruptcy case closes or a court acts to modify the stay.  And when a debtor has pending in one year three or more petitions for bankruptcy, §362(c)(4) provides that “the stay under subsection (a) shall not go into effect upon the filing of the [third or subsequent] case.” Section 362(c) seems to establish a system of progressive protections, so protections for second-time filers should fall, as the bankruptcy court put it, “[i]n the middle.”

We conclude that the most sensible middle ground, and the one most likely intended by Congress is [one] under which second-time filers get the benefit of the stay, but only temporarily (albeit with a procedure to seek the stay’s continuation)

Id. at 586.

Smith additionally noted that rather than allowing only a debtor to move for an extension, Congress allowed any “party in interest,” including a creditor, to move to extend the stay.  This fact is important because Congress allegedly anticipated that a creditor might move to extend the stay to prevent another creditor from reaching, and draining, estate property in a separate action during the bankruptcy process. Id. at 588.  Finally, the court noted that this minority view best reflected the goals of BAPCPA.  It noted that Congress described the amendment to Section 362(c) as an effort to terminate the automatic stay within 30 days in a chapter 7, 11, or 13 case filed by or against an individual if such individual was a debtor in a previously dismissed case pending within the preceding one-year period. Id. at 590.  “This purpose is best achieved by interpreting §362(c)(3)(A) to terminate the entire stay, including as to estate property.” Id. (other courts following the so-called “minority rule” include In re Reswick, 446 B.R. 362 (9th Cir.BAP 2011); In re Goodrich, 587 B.R. 829 (Bankr. D.Vt. 2018); In re Furlong, 416 B.R. 303 (Bankr. C.D.Ill. 2010); and In re Curry, 362 B.R. 394 (Bankr. N.D.Ill. 2007).

In contrast, the so-called majority rule relies on what is considered the plain language of the phrase “with respect to the debtor,” concluding that there was no ambiguity in its application.  See In re Rice, 392 B.R. 35, 38 (Bankr. W.D.N.Y. 2006) (“[F]or individuals with only one prior filing that was open during the previous year, the stay is terminated only ‘with respect to the debtor’ and not as to the trustee.”).  Such a conclusion was reached in In re Holcomb, 380 B.R. 813 (10th Cir.BAP 2008).  Here, the court stated that nowhere in Section 362 does Congress use the phrase “with respect to the debtor” as incorporating the debtor, the debtor’s separate property, and property of the estate.  In fact, the court stated that Section 362(a) differentiates between acts against the debtor, against property of the debtor and against property of the estate:

The minority approach circumvents this policy by allowing a single creditor, who may be oversecured, full access to property that would otherwise be property of the estate * * * *.  Maintaining the stay with respect to such property is an important creditor protection.

Id at 816.

Ross v. Select Portfolio Servicing, Incorporated, 945 F.3d 226 (5th Cir. 2019), adopted the majority rule.  It took this position based on the plain language of the provision and the context of the provision within Section 362, concluding that Section 362(c)(3)(A) “terminates the stay only with respect to the debtor.”  Aside from the fact that the court deemed the language in Section 362(c)(3)(A) to be clear, it also noted that Section 362(c)(3)(A) could not be read in isolation.  Rather, it must be read in conjunction with Section 362(a), which defines the scope of the automatic stay. Id. at 230. Citing to In re Smith, 910 F.3d 576, 580 (1st Cir.2018), it stated that Section 362(a) “operates as a stay of certain actions in three categories: against the debtor, the debtor’s property, and property of the bankruptcy estate.” Id.

For example, §362(a)(1) stays actions “against the debtor”; §362(a)(2) stays “enforcement of a judgment against the debtor or against property of the estate”; and §362(a)(3) stays “any act to obtain possession of property of the estate or of property from the estate.”

Id. at 230.  After recognizing that Section 362(a) operates as a stay as to certain actions in three separate categories, the court stated that “the language in “§362(c)(3)(A) becomes clear, with Congress stating in “§362(c)(3)(A) that “‘the stay under [§362(a)] * * * shall terminate with respect to the debtor.’ There is no mention of the bankruptcy estate, and we decline to read in such language.” Id.  The court then noted as follows:

Moreover, “Congress knew how to terminate the entire stay, and in fact did so in the very next section of the statute.”  “§362(c)(4)(A)(i) – which discusses debtors who have had two or more cases pending in the prior year – does not include the limiting language in “§362(c)(3)(A).  It merely states that “the stay under subsection (a) shall not go into effect upon the filing of the later case.”  Accordingly, for debtors falling under “§362(c)(4)(A)(i), the automatic stay is terminated in its entirety.  In contrast, Congress chose to use a qualifier in “§362(c)(3)(A).  This can only be interpreted as “impl[ying] a limitation upon the scope of the termination of the automatic stay.”

Id. at 230-31.

First Financial Bank v. Clark, 2021 WL 1050127 (N.D.Ind. March 19, 2021) followed the logic noted above, adding Congress could have eliminated “with respect to the debtor” and thus written a statute that terminated the entire stay after 30 days, but in its wisdom Congress didn’t. Id. at *4.  See also, In re Harris, 342 B.R. 274, 279 (Bankr. N.D.Ohio 2006) (“Had Congress intended §362(c)(3)(A) to completely terminate the automatic stay, it could have used the same straightforward language it used in §362(c)(4)(A)(i).”).  With respect to the minority argument that “with respect to the debtor” means that the automatic stay’s termination applies only to the serial-filing debtor when a joint case is filed by a serial-filing debtor and a non-serial-filing debtor, the court stated that this interpretation did not “jive with other portions of the same statute”, specifically Section 362(c)(4)(A)(i):

This other subsection likewise applies in either “a single or joint case” by a serially-filing debtor, but it goes on to say that only “the stay under subsection (a) shall not go into effect.”  Absent is any language of “with respect to the debtor” to specify that the stay terminates as to only the serial-filing debtor in the case of a joint filing. It makes no sense that the phrase would be incorporated in subsection (c)(3)(A) but not in subsection (c)(4)(A) if its meaning were to protect the innocent non-filing spouse.

Id. at *5.  Other cases adopting the so-called “majority rule” include In re McGrath, 612 B.R. 260, 266-67 (Bankr. D.N.M. 2020); In re Markoch, 583 B.R. 911, 914 (Bankr. W.D.Mich. 2018); In re Pope, 351 B.R. 14, 16-17 (Bankr. D.R.I. 2006); In re Brandon, 349 B.R. 130, 132 (Bankr. M.D.N.C. 2006); and in re Gillcrese, 346 B.R. 373,377 (Bankr. W.D.Pa. 2006).


Matthew T. Gensburg