Some debtors file for bankruptcy not because they have any realistic plan to reorganize their finances, but because filing a bankruptcy petition immediately stops a foreclosure sale that is scheduled to occur, sometimes the same morning. A debtor who does this once is a problem. A debtor who does it two, three, or four times with the same property is a serial filer, and it is one of the most frustrating situations a creditor can face.
We have tools to deal with this, and we use them.
How the Serial Filing Problem Works
Every time a bankruptcy petition is filed, the automatic stay goes into effect. Even a bare-bones “emergency” filing with no schedules, no plan, and no real attempt at reorganization triggers the stay instantly. The foreclosure sale must stop.
The case may be dismissed a few weeks later, perhaps because the debtor failed to file the required paperwork, failed to attend the meeting of creditors, or the court dismissed it as a bad-faith filing. But by then, the sale date has passed, and the creditor has to restart the notice process.
A debtor who knows this can use successive bankruptcies to hold a creditor at bay for years, even when no genuine reorganization is underway.
In Rem Stay Relief: The Answer to Serial Filers
Congress addressed this problem specifically. There is a provision in the Bankruptcy Code that allows a bankruptcy court to grant “in rem” stay relief.
An in rem order is different from ordinary stay relief. Ordinary stay relief lifts the stay in the current case. In rem stay relief lifts the stay as to the property itself, and it remains effective in any bankruptcy case filed within two years of the date the order is entered.
That means if the debtor files another bankruptcy case the next week, the month after, or two years later, your in rem order is already on file, and you can proceed with the foreclosure without filing a new stay relief motion in the new case. The order is recorded in the county deed records, which is how it binds future cases.
To get an in rem order, we must show the court that the filing was part of a scheme to delay or defraud creditors. That is typically evidenced by a pattern of multiple filings affecting the same property, or by unauthorized transfers of the property to others to generate new bankruptcy filings by different people.
What We Do When We Spot a Serial Filer
When a client comes to us with a borrower who has filed bankruptcy more than once to stop the same foreclosure, we immediately evaluate whether to seek an in rem order. We also look at whether to move to dismiss the case as a bad-faith filing, which can result in the debtor being barred from refiling for up to 180 days, sometimes longer.
We have successfully obtained in rem stay relief for clients in exactly these situations. It does not guarantee the debtor will not try something else, but it removes the most effective delay tactic from their toolkit.
If your borrower is a repeat filer, contact us. We know how to respond.
In this section: Bankrupt Debtors · Automatic Stay Relief
Frequently Asked Questions
How many times can a debtor file bankruptcy to stop the same foreclosure?
Technically there is no absolute limit on the number of times a debtor can file for bankruptcy, but each successive filing receives less automatic stay protection than the last. After a second filing within a year, the stay only lasts 30 days unless the court extends it. After a third filing within a year, there may be no automatic stay at all. And an in rem stay relief order, described above, removes the stay protection entirely as to the specific property for two years. We evaluate and pursue these remedies aggressively for clients dealing with serial filers.
Can someone other than the original debtor file bankruptcy on the same property to generate a new stay?
Yes, this is the transfer scheme addressed by the in rem stay relief provision. A debtor might transfer the property to a family member or associate who then files their own bankruptcy, generating a new automatic stay. An in rem order recorded in the deed records binds the property regardless of who holds title, stopping this tactic for the two-year period.