By Jason Wilson-Aguilar

An English poet once observed that "[u]ncertainty and expectation are the joys of life."¹ If that is true, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)² creates boundless joy for all bankruptcy practitioners, particularly with respect to changes regarding the automatic stay: a powerful device integral to the bankruptcy process.

As soon as a bankruptcy petition is filed, the automatic stay forbids a whole host of collection and enforcement activities. With the BAPCPA, Congress added more exceptions and created new circumstances where the stay is not automatic or where it expires under certain conditions. The primary amendments can be generally divided into four categories: 1) general exceptions; 2) repeat filer provisions; 3) personal property exceptions; and 4) in rem relief.

General Exceptions
The BAPCPA expands from 18 to 28 the enumerated exceptions to the automatic stay.³ Notably, the Bankruptcy Code previously excepted from the automatic stay proceedings to establish paternity, to establish or modify support or to collect support from property that is not property of the estate. Additional exceptions now include other domestic relations matters such as proceedings concerning child custody and visitation, dissolution (except where this interferes with property of the estate) or domestic violence and certain proceedings to enforce support obligations.

Another exception covers any act to enforce a lien or security interest against real property if the debtor is ineligible under Section 109(g) to be a debtor or if the case was filed in violation of a prior bankruptcy court order prohibiting the debtor from filing another bankruptcy case.⁴ Creditors should be wary in relying on this exception, however, as there is no guarantee a court will agree that the 180-day bar under Section 109(g) applies.

Repeat Filers

In an apparent attempt to reduce abuse of the bankruptcy process, Congress made it more difficult for repeat bankruptcy filers to obtain the benefits of the automatic stay. Under Section 362(c)(3), the stay terminates 30 days after the filing of a petition when a prior Chapter 7, 11 or 13 petition was pending and dismissed within the prior year.

Under Section 362(c)(3)(B), the debtor (or another party in interest) may move for a continuation of the stay as to any or all creditors if the debtor can demonstrate "good faith." However, the debtor must move and the court must hear the motion within 30 days of the petition date. The debtor must also overcome a presumption of bad faith with "clear and convincing" evidence when the debtor had more than one bankruptcy case pending in the last year or if a prior case was dismissed under certain specified conditions.

It is even more difficult for "serial" filers, i.e., those who have filed three or more prior bankruptcy petitions, to obtain a stay. There is no stay at all if the debtor had two or more cases within the prior year, except where a case was refiled after dismissal under one of the abuse tests ("means test" and "totality of the circumstances" test).⁵ A creditor also may seek an order confirming that no stay is in effect, which the court must "promptly" enter,⁶ or an order confirming that the stay has been terminated under Section 362(c).⁷

Again, the debtor or another party in interest may seek a stay as to any or all creditors if the debtor can demonstrate "good faith," but that stay is not retroactive and is only effective once the order is entered.⁸ The same bad-faith presumption that applies to continuations applies here.⁹

Personal Property

The stay terminates as to personal property and is removed from property of the estate if the debtor fails to timely file a statement of intent regarding the property (i.e., whether to surrender or retain) or fails to perform the stated intent within 30 days of the meeting of creditors.¹⁰ The stay does not terminate, however, if the creditor refuses to enter a reaffirmation agreement on the original contract terms. The same rules apply if, 45 days after the meeting of creditors, the debtor fails to reaffirm the debt or redeem the property as provided in the statement of intent.¹¹

In addition, the court may extend the stay on the trustee's motion if the personal property is of benefit to the estate and the court orders adequate protection and requires the debtor to deliver the collateral to the trustee.

In rem Relief

A difference of opinion amongst bankruptcy judges over whether they had authority to grant in rem relief² is now moot as the BAPCPA specifically provides for in rem relief.¹³ Bankruptcy courts now may grant relief from stay as to real property if the court finds that the debtor or debtors have attempted to "delay, hinder, and defraud" creditors by transferring ownership (whether all or parts) of the property or filing multiple bankruptcy cases affecting that property.

The in rem relief order is effective for two years from entry if it is "recorded in compliance with applicable State laws governing notices of interests or liens in real property." A debtor can, however, request relief from an in rem order for changed circumstances or good cause. To be on the safe side, anyone relying on such an order should properly record the order to avoid potential problems.

Only time and court opinions interpreting the Code changes will answer many of the issues lurking in the statute.