Automatic stay

• S. 256 § 302; serial filings
A new § 362(c)(3) provides that if a Chapter 7, 11, or 13 case is filed within one year of the dismissal of an earlier case (other than a Chapter 11 or 13 case filed after a § 707(b) dismissal), the automatic stay in the second case terminates 30 days after the filing, unless a party in interest demonstrates that the second case was filed in good faith with respect to the creditor sought to be stayed. And if a second repeat filing takes place within the one-year period, the automatic stay will not go into effect (and the court is required promptly to enter an order confirming the inapplicability of the stay on request of a party in interest). However, a party in interest may obtain imposition of the stay by demonstrating that the third filing is in good faith with respect to the creditor sought to be stayed. For both second and third filings within one year, circumstances are described which generate a presumption that the new filing was not made in good faith, and such a presumption would be required to be rebutted by clear and convincing evidence.

Under a new § 362(i), this presumption would not arise in “any subsequent case” if a debtor’s case is dismissed “due to the creation of a debt repayment plan.”

• S. 256 § 303; in rem relief; ineligible debtors “In rem” relief from the automatic stay is authorized by a new § 362(d)(4). In cases involving either (A) transfers of real property collateral without the consent of the secured creditor or court approval or (B) multiple bankruptcy filings involving the same real property, the court may issue an order of relief from the automatic stay, which order, properly recorded, is binding on all owners of the property for two years from the date of entry. A party in interest may file a request for imposition of the stay within 30 days of a subsequent case filing, and the court may impose the stay only if the party demonstrates that the case was filed in good faith as to the creditors sought to be stayed. Where in rem relief is effective, new § 362(b)(20) creates an exception to the automatic stay for lien enforcement activity in later cases.

A new § 362(b)(21) excepts from the stay any act to enforce a lien or security interest in real property if the debtor was ineligible under § 109(g) or filed the case in violation of an order “prohibiting the debtor from being a debtor” in another caseunder Title 11.

• S. 256 § 311; exception for leased residential real estate Two new exceptions from the automatic stay are established for landlords seeking to evict tenants. The first, § 362(b)(22), allows the continuance of any eviction proceeding in which the landlord obtained a judgment of possession prior to the filing of the bankruptcy petition. The second, § 362(b)(23), deals with evictions based on “endangerment” of the rented property or “illegal use of controlled substances” on the property. Paragraph (b)(23) excepts the eviction proceeding from the stay if (a) it was commenced before the filing of the bankruptcy case, or (b) if the endangerment or illegal use occurred within the 30 days before the bankruptcy filing. In either situation, the landlord would be required to file with the court and serve on the debtor a certificate setting out the facts giving rise to the exception.

New provisions in § 362(l)-(m) allow a debtor to contest the applicability of both of these new exceptions by filing timely certifications under penalty of perjury. As to the (b)(22) lease exception, the debtor would be able under § 362(l) both to keep the stay in effect for an initial 30 days after the bankruptcy filing—by certifying that applicable nonbankruptcy law allowed the lease to remain in effect upon the debtor’s cure of the default that was the basis of the eviction order—and to keep the stay in effect after 30 days by filing a further certification that the cure amount had been paid within the initial 30 days. As to (b)(23), a new § 362(m) provides that if the debtor files a certificate denying the assertions in the landlord’s certificate, the court is required to conduct a hearing within 10 days “to determine if the situation giving rise to the lessor’s certification . . . existed or has been remedied.”

• S. 256 § 315(a); notice to creditors Section 342(c) is amended to remove the provision that a failure by the debtor to supply notice to creditors in the prescribed form does not invalidate the notice. Instead, a new § 342(g) provides that no monetary penalty may be imposed on a creditor for violating the automatic stay or for failing to turn over property, unless notice is given in a form effective under amended § 342. As amended by new provisions in (c)(2), (e), and (f), § 342 now provides that notice to a creditor will not be effective unless it is served at an address filed by the creditor with the court or at an address stated in two communications from the creditor to the debtor within 90 days of the filing of the bankruptcy case (or between 90 and 180 days if the creditor was prohibited from communicating with the debtor during the more recent 90-day period). To be effective, the notice must also include the account number used by the creditor in the two relevant communications. An otherwise ineffective notice will only subject the creditor to liability if the notice was “brought to the attention of the creditor,” which is defined as receipt by a person designated by the creditor to receive bankruptcy notices.