We are pleased to announce a recent victory representing one of our local lending clients. In the last decade, it has been the practice of Debtors’ counsel to dismiss and re-file bankruptcy cases shortly after a secured creditor has been granted relief from stay in order to further delay the creditor from moving forward with its state law rights. In granting our Motion to Dismiss the debtor’s re-filed case, the Court agreed that creditors should be allowed the full 180 days after receiving relief from stay in order to pursue their state law rights without being interrupted by another bankruptcy case.
11 U.S.C. 109(g)(2) includes a clear prohibition against a debtor re-filing for bankruptcy within 180 of requesting and obtaining a voluntary dismissal of a prior case following the filing of a motion for relief from stay. Debtors’ counsel in Maine had been relying on an old bankruptcy court decision that they misinterpreted to allow a dismissal and refiling within 180 days if the Motion for Relief had been “resolved,” including when the Motion for Relief had been granted.
In our case, we argued that that interpretation was an absurd reading of 109(g)(2) and that creditors should be allowed 180 days of breathing room to move forward with their state law rights without having to face another bankruptcy case and the resulting automatic stay. The Court agreed and granted our Motion to Dismiss.
This is a significant victory for secured creditors and should stop (or give substantial ammunition against) this abusive practice of serial filing going forward.