In an April, 2011, Denver federal bankrutpcy judge, Howard R. Tallman, granted the debtor’s motion to continue the automatic stay over the objection of a Denver credit union. The debtor filed a chapter 13 in 2005.  She was close to finishing payments on her chapter 13 plan, when she lost her job with the City and County of Denver.  Her chapter 13 proposed payments over 5 years, which is allowed under the bankruptcy code  The bankrutpcy code pertaining to the chapter 13 rules, may be found at 11 U.S.C. Section 1301.

Unfortunately for the debtor, in her first filing, this creditor, the Denver credit union, sought relief from the automatic stay.  Once a debtor files for bankruptcy, protection is granted over all lower courts and creditors.  This is because bankruptcy court is a federal court which has priority and superiority over all lower state courts and any creditors in the case.

Once a debtor files a second bankruptcy case, following the dismissal of a prior case, more issues arise.  In 2005, the federal bankruptcy laws were substantially changed.  One of the changes affected repeat filers or “frequent filers.”  In short, if a debtor files a second case after the first case is dismissed, the debtor must file a motion to continue the automatic stay.  In other words, the automatic stay is no longer “automatic” in the second case.  This is a trap for the unwary.  Many lawyers overlook this issue, committing legal malpractice in the process.

Here, the debtor hired Cimino & Benham, bankruptcy lawyers, John Cimino, specifically.  Within days of filing her second case, Cimino filed a motion to continue the automatic stay.  The motion needs to be filed promptly because a hearing must be held within 30 days.  This is another pitfall.  If the hearing is not scheduled AND held within 30 days of the filing of the case, the debtor’s motion will not be heard and all is lost.  That is, the creditor can take action against the debtor in the second case as though it had never been filed.  In other words, without a court order obtained in the second case continuing the automatic stay, there will be no automatic stay – huge trouble for the debtor.

In this case, the credit union was trying to foreclose on the debtor’s home.  The timing was perfect. Because the debtor lost her job, she was not able to complete her plan payments in the first case. The first case got dismissed.  However, before it got dismissed, the credit union had filed for foreclosure in state court.  The race was on.  The debtor had to refile her second case before the foreclosure sale date or she would lose her home to foreclosure.  The debtor hired John Cimino, who was her attorney in the first case.  As soon as the first case got dismissed, the debtor filed her second case, and Cimino promptly filed a motion to continue the automatic stay.  At a hearing held pursuant to the rules, Judge Tallman, heard testimony and reviewed the exhibits.  Because of the importance of the ruling, Judge Tallman took the matter under advisement.  That is, he did not rule from the bench at the end of the hearing, but wanted to consider it after reviewing all the testimony and exhibits.  After a tense several days of waiting, the court ruled in favor of the debtor and granted her motion to continue the automatic stay.  The second bankruptcy stopped the foreclosure and the automatic stay was reinstated or maintained in the second case.  A huge win for the debtor and John Cimino.  Whew!

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