Section 362(c)(3)(A): A "Textual Dumpster Fire" for Serial Filers

When a debtor files bankruptcy two times in a one-year period, the automatic stay terminates on the 30^th day. But what exactly does that stay termination apply to? The debtor? Property of the debtor? Or property of the entire estate? Well, the answer depends on where the issue is being heard.

The Code and The Circuit Split

The “textual dumpster fire”[1] that is section 362(a)(3)(A) provides that, on the 30^th day after the filing of a debtor’s second bankruptcy within one year, the stay under subsection (a) terminates “with respect to a debt or property securing such debt or with respect to any lease . . . with respect to the debtor.” 11 U.S.C. § 362(a)(3)(A) (emphasis added). Two circuits are split on whether this 30-day termination applies to the estate as a whole, or only as to the debtor and the debtor’s property. The splits on this issue fall within two views: the majority view and the minority view.

For background, Congress adopted the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005 to provide less protection for abusive bankruptcy filers who file more than twice in a one-year period. However, in attempting to provide such protection, 11 U.S.C. § 362(a)(3)(A) only seems to create more confusion on what the subsection actually applies to in a serial filing.

Amongst the circuit split, the First Circuit has fallen within the minority view, which is that on the 30^th day, the “automatic stay terminates in its entirety.” In re Smith, 910 F.3d 576, 591 (1st Cir. 2018). On the other hand, the Fifth Circuit has fallen within the majority view, which is that on the 30^th day, the “automatic stay remains in place for the property of the estate.” Rose v. Select Portfolio Servicing, Inc., 945 F.3d 226, 230 (5th Cir. 2019). Meaning, the stay is erased as to “the debtor and the debtor’s property” but not “for the property of the estate.”[2]

The Northern District of Illinois Weighs In: Wade

In his recent Wade decision, Judge Steven C. Seeger with the United States District Court for the Northern District of Illinois emphasized that the minority view, that the stay ends entirely, “has something going for it” since it does “promote the overarching purpose of the 2005 amendments . . . to crack down on abusive bankruptcy petitions by repeat filers.”[3] However, that overarching statutory purpose must “take a back seat to the statutory text,”[4] because it would be “hard to read the phrase ‘with respect to the debtor’ to mean ‘with respect to the debtor, and the property of the debtor, and the property of the estate.’ That’s the whole enchilada.”[5]

In the underlying Wade bankruptcy case, Harold and Lorraine Wade filed for bankruptcy twice within one year. After the 30-day automatic stay expired "with respect to the debtor" under section 362(c)(3)(A), creditor Kreisler Law P.C. obtained a default judgment against the Wades and recorded a lien against their real property—property that belonged to the bankruptcy estate. The Wades moved for sanctions, arguing the automatic stay still protected estate property; Kreisler countered that the stay had terminated entirely. In the bankruptcy case, the court adopted the minority view that the stay was lifted in its entirety, including property of the estate and denied sanctions. This decision was reversed and remanded.

In anticipation of an appeal to the Seventh Circuit, Judge Seeger adopted the majority view and provided an in-depth critique of the various, competing interpretations of Section 362(c)(3)(A). In his decision, Judge Seeger ultimately held that the automatic stay terminates only as to the debtor and the debtor's property, reasoning that reading "with respect to the debtor" to encompass estate property would collapse a fundamental distinction in bankruptcy law, the difference between the debtor and the estate. The court emphasized that Congress knew how to terminate the stay entirely, as demonstrated by the neighboring provision for three-time filers in section 362(c)(4)(A)(i).[6] Judge Seeger also rejected the “spousal exclusion” theory that the bankruptcy court adopted as too creative and implausible.[7]

Conclusion: A Call to Put Out the Dumpster Fire

While acknowledging that the majority view leaves the automatic stay largely intact and may not fully achieve Congress's goal of curbing abusive serial filings, Judge Seeger held that policy objectives must yield to the statutory text. In its “textual dumpster fire” attack on section 362(c)(3)(A), the court called on Congress or the Supreme Court to “hose [] down and put [] out” the ambiguity fire for good.[8]