Individuals With Repeat Bankruptcy Filings & Automatic Stay Termination (Morgan & Blankenship)

By: Donald L. Swanson

Individuals who repeatedly file bankruptcy face an automatic stay problem under under 11 U.S.C. § 362(c).

Subparts (c)(3)&(4) of § 362 terminate the automatic bankruptcy stay—automatically—for individual repeat-filers.

Subpart (c)(3) deals with a first-time repeat-filer like this:

“(3) if a single or joint case is filed by or against a debtor who is an individual in a case under chapter 7, 11, or 13, and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed, . . . (A) the stay under subsection (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 later case. . . . (B) on motion . . . the court may extend the stay . . . if . . . the filing of the later case is in good faith.”

And subpart (c)(4) deals with a second-time (or more) repeat-filer like this:

“(4)(A)(i) if a single or joint case is filed by or against a debtor who is an individual under this title, and if 2 or more single or joint cases of the debtor were pending within the previous year but were dismissed, . . . the stay under subsection (a) shall not go into effect upon the filing of the later case; and (ii) on request of a party in interest, the court shall promptly enter an order confirming that no stay is in effect . . . (B) . . . the court may order the stay to take effect . . . if . . . the filing of the later case is in good faith.”

Here are a couple obvious differences between subparts (3) and (4) of § 362(c):

subpart (3) does not apply to cases under Chapter 12, while subpart (4) has no such limitation; and
subpart (3) provides a 30-days opportunity to obtain an extension of the stay based upon proof of a good faith filing, during which time the stay remains in effect, while subpart (4) eliminates the stay entirely, subject to reinstatement upon proof of a good faith filing.

Two recent bankruptcy court opinions (decided 8 days apart and in different districts) provide information on the application of the § 362(c)(3)&(4) statutory standards. What follows is a summary of what each of those two opinions says about § 362(c).

In re Morgan

In re Morgan, Case No. 25-30792, Northern Ohio Bankruptcy Court (decided June 23, 2025; Doc. 19), identifies procedural rules under § 362(c)(3).

Debtors file a second Chapter 13 bankruptcy within one year and move to, (i) extend the automatic stay under § 362(c)(3), and (ii) expand (under Fed.R.Bankr.P. 1007(c)(7)) the 30-days deadline in § 362(c)(3) for “excusable neglect.”

–No Expansion of 30 Days Deadline

The Bankruptcy Court denies Debtors’ motion because:

it was filed 60 days after the second Chapter 13 bankruptcy filing; and
the automatic stay already terminated, by operation of law—upon the expiration of 30 days after the second Petition date.

The Bankruptcy Court explains:

when a debtor files a second bankruptcy case within one year, § 362(c)(3) mandates that the automatic stay terminates on the 30th day after filing the later case;
the statute provides that the automatic stay can be extended beyond the 30-day period, on motion with notice and a hearing process that must be completed before expiration of the 30-day period;
a bankruptcy court has no discretion to expand the 30 days deadline; and
it is the movant’s duty to assure that the process to extend the 30 days deadline is concluded within the 30 days limit.

Here, Debtors filed their motion 60 days after their second case filing—thus, their extension request is untimely.

As to Debtors citation to Fed.R.Bankr.P. 1007(c)(7) as grounds for enlarging the time to file a motion to extend the automatic stay, the Bankruptcy Court declares:

Rule 1007(c) sets deadlines for filing schedules, statements, and other specified documents and allows for extensions of deadlines for filing “a document under this rule”;
nothing in Rule 1007 relates to filing a motion to extend the automatic stay under § 362(c)(3); and
the 30 days deadline in § 362(c)(3) is couched in “mandatory language” that cannot be expanded.

–Confirming a Plan Anyway

Despite a termination of the automatic stay for a repeat filer, a plan can still be confirmed because an effective stay is not a confirmation requirement under § 1325(a).

–Split of Authority on Scope of Relief

There is a split of authority on the scope of a stay termination under § 362(c)(3):

a majority of courts say the automatic stay terminates only as to the debtor and the debtor’s property, while the stay remains in effect as to property of the estate; but
a minority view is that the termination applies more broadly—ending the automatic stay in its entirety, including as to property of the estate.

The In re Morgan opinion follows the majority view, offering this explanation:

many of the decisions supporting the minority view do not consider what effect a § 362(c)(3) stay termination would have in Chapter 7 cases; and
Bankruptcy Code provisions that apply in chapters 7, 11, and 13, should be interpreted to avoid dysfunction in all those chapters—and such precept has been neglected in minority view decisions.

In re Blankenship

In re Blankenship, Case No. 1:25-bk-11129, Eastern Tennessee Bankruptcy Court (decided July 1, 2025; Doc. 84), addresses the legal standard for deciding “good faith” under § 362(c).

Within one year, Debtor files three individual bankruptcy cases, pro se—the first under Subchapter V and the last under Chapter 13.

In the third case, Debtor seeks imposition of the automatic stay against a landlord to stave off eviction of Debtor’s sole proprietorship business.

§ 362(c)(4) contains this presumption in subpart (c)(4)(D):

a third-time (or more) filing within a year “is presumptively filed not in good faith (but such presumption may be rebutted by clear and convincing evidence to the contrary).”

On rebutting the “not in good faith” presumption, courts have applied the “totality of the circumstances” test. In applying that test, courts consider the following non-exhaustive factors:

the timing of the petition;
how the debt arose;
debtor’s motive;
how debtor’s actions affected creditors;
why debtor’s case was dismissed;
the likelihood that debtor will have steady income throughout the case and will be able to fund a plan; and
whether any party objects to the motion.”

Arguably, the most important of such factors is debtor’s ability to fund and perform under a plan of reorganization.

Debtor bears the burden of rebutting the “not in good faith” presumption—which burden Debtor in this case fails to carry.

In this case, the Bankruptcy Court finds that Debtor engaged in “the garden-variety abuse of the bankruptcy system that Congress acted to prevent” through enactment of § 362(c). Specifically:

Debtor filed this third case to delay and hinder eviction proceedings cause by a lease arrears for which Debtor has made no plans to cure;
Debtor “wants maximum assistance without any cost to himself”—business lease spaces for free and assistance of counsel for free; and
Debtor “seems to also want a ‘free bankruptcy’ of sorts”—“one that requires no fees, no plan, no creditor matrix, no deadlines, and no payment to his creditors.”

Conclusion

That’s good information to know.

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