Maryland wrestles with BAPCPA

An interesting case came out of the Maryland Bankruptcy Court last week involving section 362(c)(3) of the Bankruptcy Code, a small but pesky section of the law that was added by the widely disliked Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The provision at issue shortens the automatic stay for debtors with two pending bankruptcies within a year of each other, thus serving as a penalty for serial filers; it specifically states that “the stay . . . shall terminate with respect to the debtor on the 30th day after the filing of the later case.” The problem, and the reason why courts across the country have struggled with this section’s meaning, is that it’s unclear what Congress intended by the phrase “with respect to the debtor.” Does the stay end in all respects after 30 days? Or does it end only with respect to the debtor and the debtor’s property (thus leaving the stay in place for the bankruptcy estate – meaning all interests of the debtor in property at the time of the bankruptcy filing)? The Court ultimately chose to use the latter approach – considered the majority approach – after thoroughly researching many courts’ analyses and finding “no clear answer to the question.” The Court also included a footnote that may give pause to potential chapter 7 filers, reminding the reader that the chapter 7 estate is generally limited to the debtor’s interests in non-exempt property as of the petition date – meaning that an exempt homestead would not be protected by the stay under the majority approach. The case is In Re Wood, and it can be found here: http://www.mdb.uscourts.gov/sites/default/files/images/opinions/Wood%20Section%20362_Memo%20Op.pdf

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