The Serial Filing and the Lapsed Automatic Stay

No. Section 362(c)(4)(A)(i) provides that if a debtor has had two or more prior cases pending within the preceding one year that were dismissed, the automatic stay does not go into effect upon the filing of the new case. Dana had two prior cases, both dismissed within the past 12 months, so the stay does not arise automatically. The burden shifts to Dana: under section 362(c)(4)(B), she may request that the court order the stay to take effect, but she must file a motion and demonstrate by clear and convincing evidence that the new case was filed in good faith as to the creditors to be stayed. The court considers the debtor's overall circumstances, including whether the prior cases were dismissed for circumstances beyond her control, whether she has proposed a feasible plan, and whether the filing was intended to hinder creditors. Because the stay is absent, the servicer may proceed with the trustee's sale unless and until the court orders otherwise. Dana's attorney's statement that 'the stay is back' is incorrect and could expose Dana to a completed sale. She should immediately file a motion under section 362(c)(4)(B) and, in the interim, seek a temporary restraining order or emergency hearing to preserve the status quo. Simply filing the petition does not protect her.

When a court orders the stay into effect under section 362(c)(4)(B), the stay terminates 30 days after it is ordered unless the court extends it. To extend, Dana must show by clear and convincing evidence that the new case is filed in good faith and that she has a feasible plan. Practically, she should present evidence of stable income ($4,900 monthly against $4,300 in expenses leaves only $600 of disposable income), a proposed plan that cures the $8,000 mortgage arrears within the plan term, and an explanation for the prior dismissals. Note the arithmetic problem: $600 monthly over 36 months yields about $21,600, which must cover the arrears, the trustee's percentage fee, and any priority claims; the plan is tight but potentially feasible if the vehicle loan is paid outside the plan and the credit card debt is treated as unsecured. The court will also weigh whether the serial filings were abusive. Dana should be prepared to explain why the earlier plans failed and what has changed. An extension is discretionary and not automatic; failing to move for extension before day 30 means the stay lapses and the servicer can resume the sale.

Conversion to Chapter 7 does not create a new automatic stay; the stay that applies is the one arising in the converted case, and if the stay never went into effect under section 362(c)(4), conversion does not cure that problem. Conversion also changes the analysis of her assets. In Chapter 13, Dana keeps her property and pays creditors from income. In Chapter 7, a trustee would examine whether she has non-exempt equity in the print shop equipment, the vehicle, and any accounts receivable. If the equipment or vehicle has equity above the applicable exemption, the trustee could liquidate it. Her $22,000 in credit card debt would be dischargeable absent fraud or other section 523 issues, but the mortgage arrears would still need to be addressed to save the home, and a Chapter 7 filing does not by itself cure arrears. Additionally, because Dana has two prior dismissals in a year, a Chapter 7 filing may draw scrutiny under section 707(b) if her income exceeds the means-test threshold; with $4,900 monthly income for a household of unknown size, that analysis depends on her household size and allowable deductions. Conversion is not a simple escape hatch and should be evaluated against the loss of the home and business assets.