I had a consultation with a client recently to discuss refiling his Chapter 13. The individual was in a Chapter 13 for one year before losing his job and falling behind on his Chapter 13 Plan Payments. After he fell behind on his plan payments the Chapter 13 Trustee filed a Motion to Dismiss for Failure to Make Plan Payments. The Trustee was successful on his motion and the case was dismissed. The individual has now obtained a new job, but has also received a Notice of Foreclosure from his mortgage company. When he filed his Chapter 13 case, he was several months behind on his mortgage payment and those arrearages were to be paid out of his Chapter 13 plan. The mortgage company had not received all of the arrearage before his case was dismissed, so they now want to foreclose.
Here are my thoughts to people in a similar situation:
A debtor can refile a Chapter 13 case immediately after his first case is dismissed; however, if the debtor’s second case is filed within twelve months of his first case pending, he may not get the same protection afforded him in his first case under the Automatic Stay. Usually, when a person files bankruptcy they are under the protection of the Automatic Stay, which means their creditors cannot take any collection efforts against them or even contact them.
This protection generally lasts for the duration of their case. However, when a debtor has had two case pending within twelve months, then the Automatic Stay is only effective for thirty days.
To extend this protection the debtor must file a Motion to Extend the Automatic Stay and convince the judge to do so. Furthermore, the debtor must file the motion, request a hearing, attend the hearing and have the motion granted all within the first thirty days of his second case.
In order to succeed in his Motion to Extend the Automatic Stay the debtor must demonstrate that his second case was filed in good faith and not merely to hinder or delay his creditors for their collection efforts. Different Judges vary on what they require to prove this good faith and to what extent they scrutinize these motions. That is why it is important to have an attorney familiar with your court’s local rules and practices.
If the debtor is not successful on his motion or if his attorney does not timely file the motion, the mortgage company would be permitted to foreclose on his property even though he is presently in a Chapter 13.
This topic is also important for individuals currently considering dismissing their case. If you are behind on your plan payments and are considering dismissing your case and refiling a new case, you need to consider the implications listed above and what your chances are of being successful on a Motion to Extend the Automatic Stay.