The Code provides several exceptions to the stay. Before BAPCPA, the Code itemized 17 exceptions. BAPCPA added an extra 10 exceptions, bringing the total to 27. [362(b)] It also added several other new subsections that amount to relief from the stay, even if not formally designated as such. Of these, perhaps the most important are two:

• Criminal proceedings. [362(b) (1)] The debtor has to obey the criminal law just like anyone else, and he can’t suspend his criminal trial just by filing for bankruptcy. There is a bit of uncertainty around the edges of this rule. For example, suppose the prosecutor brings charges against anyone who passes a bad check at the supermarket, but drops the case once the debt gets paid. Is the prosecutor acting as a prosecutor and therefore free to proceed, or as a collections agent and consequently stayed? Many courts have held that he is not stayed, though it would be easy to argue that he is.

• “Regulatory” cases. [362(b) (2)] Again, the debtor is bound by general laws, so for example, a hearing before the state Environmental Protection Agency ought to be able to go ahead as planned. The trouble starts when the “regulator” starts to impose money “remedies.” Is he just “regulating,” or is he trying to collect as a pre-bankruptcy claim? There is a lot of case law on this one, and it is not easy to provide a quick summary. Note also that the “regulator” may only “regulate:” he has no power actually to take money or property from the estate unless/until he
gets relief from the stay.

The new exceptions cover a great miscellany of cases, some of which were probably
“excepted” all along under older and more general rules. Generally, life is made easier for landlords and for employers implementing wage-deduction orders.

The BAPCPA amendments added several provisions calculated to address a particular problem that arose after the advent of the broad self-executing stay in 1978. This is the problem of so-called “successive filing.” Consider Desmond, about to lose his house to BigBank in a mortgage foreclosure. Ten minutes before the hammer falls, Desmond files for bankruptcy. BigBank gets relief from the stay and again starts to foreclose. Ten minutes before this “second try,” Desmond files again. And so forth.

Nobody defends this gambit. The code now seeks to deal with this problem in several ways. For example, a new rule addresses the debtor who had a case pending within the previous year. In his new case, the stay will terminate after 30 days unless the court orders otherwise. [362 (c) (3)] Another rule addresses the instance of a debtor who has had more than one case within the previous year. In this scenario, the stay will not go into effect unless the court says otherwise.

Of course, Desmond may not file the second case himself. The second case may show up in the name of a new debtor, who took title to (say) one-one-hundredth of Blackacre—minuscule, but still enough to stop a foreclosure. Further, a new section permits the court to lift the stay against real property if it finds that the filing was part of a fraudulent scheme. [362 (d) (4)] Indeed, the Code says the judge may go further; he may declare that his order be binding in any case filed during the next two years.

Finally, a word about scope. Generally, the stay protects only the debtor, not people other than the debtor. Consider Grandma’s Pie Co., of which John C. Grandma is president and majority stockholder. The Pie Co. is a limited-liability entity, separate from John C., so John C. is not liable for Pie Co.’s debts. But it turns out that John C. made a contract personally to guarantee the loan made by BankCo to the Pie Company. If Pie Co. files for bankruptcy, BankCo is stayed against efforts to collect from Pie Co., but BankCo may still pursue John C. There is an important exception: The stay does protect co-debtors in chapter 12 or 13. [1201 (a); 1301 (a)]

See Also: Bankruptcy Lawyers Boston