Using the Automatic Stay Too Often
Filing bankruptcy to save your home from foreclosure is an option that is a useful and powerful feature of the automatic stay, particularly in Chapter 13.
A mistake I see is repeatedly filing bankruptcies to stop foreclosure. The bankruptcy code addresses repeated filings because it is treated as abusive to the bankruptcy process to make excessive use of the automatic stay over a short period of time.
This serial filing of bankruptcy is often the result of people either filing on their own to stall foreclosures, or used by loan modification scammers that either file for someone or show a person how to file bankruptcy on their own. There have been numerous cases we see where we can no longer help a person, or the bankruptcy becomes much riskier due to the repeated filing of bankruptcy. If the case had been filed correctly from the outset, the likelihood of success would have been much greater.
There is more nuance to this, but generally the rule is that if you file one bankruptcy, the stay protects both you and your property.
If you file two cases within one year, the second case only gets a 30 day stay, though the filing party may seek to extend the automatic stay for longer. It’s essentially a “justify it” scenario where you must explain why you should get a longer stay and show good faith.
If you file three cases within one year, there is no automatic stay. You must file a motion to impose the stay, and show by “clear and convincing evidence” there is a good reason for this third (or fourth or fifth…) filing and that use of the stay is not bad faith. Courts look dimly upon the person who is using the bankruptcy process to merely hinder and delay creditors, including bank lenders from foreclosing.
This brief description is an oversimplified statement of the process, but it shows you the perils of filing over and over to save your home (or car). The automatic stay is one of the most beneficial tools given to a person that files bankruptcy; just don’t break the tool by misuse.