By Ryan C. Wood
I found the all-time record holder for the most bankruptcy petitions filed I have ever witnessed. I have redacted the person’s name even though it is technically a public record. This individual has filed 14 Chapter 13 bankruptcy petitions and 1 Chapter 7 petition since 2009. Yes, 15 total separate bankruptcy petitions for relief and they all have been dismissed for one reason or another except the most recent filing. Please see the cases and dates filed at the end of this article. I cannot think of a reason why someone would file this many petitions for relief and actually obtain some sort of value for it. So is it okay to file 15 petitions for relief in five years under the Bankruptcy Code? I cannot specifically answer that question for this person given I do not know the bankruptcy filers circumstances or facts surrounding the many filings. What I do know is this person may have spent a lot of money on filing fees (possibly exceeding $4,000.00, unless a fee waiver or installment payment was made for the filing fee) and used a lot of the Chapter 13 trustee and courts time to administer these cases before dismissal. This article will discuss the effect on the automatic stay regarding multiple bankruptcy filings and the possible repercussions against someone that files this many petitions for relief in such a short period of time.
Multiple Filings and the Automatic Stay
One of the most powerful bars to filing multiple bankruptcy petitions is the limitations of the automatic stay past the first case that is filed. In the first bankruptcy case filed the debtor will get an unlimited automatic stay stopping any and all collection activity as to all creditors. If the same debtor files another case within a year of the first case and the first case was dismissed due to not filing the required paperwork, not paying the fees on time, not showing up for the mandatory meeting of creditors and other reasons, then the automatic stay only lasts for 30 days. If the same debtor files a third case within a year of the first two cases then there is no automatic stay at all. In the second filed case the automatic stay can be extended past the 30 days if an order extending the stay is entered prior to the 30 day stay expiring. In the third case the automatic stay can be imposed by filing a motion with the bankruptcy court.
Possible Repercussions for Filing Multiple Bankruptcy Petitions – Vexatious Litigants
Section 109(g) of the Bankruptcy Code provides: (g) Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if— (1) the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or (2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title.
I mostly practice bankruptcy law in the Northern District of California. We actually have a published opinion on this subject. In re Walker, No. C-98-20966-JW. In the Walker case the debtors filed ten petitions total. Their ninth bankruptcy case was dismissed with prejudice and the Bankruptcy Judge, the Honorable James R. Grube, barred the Walkers from filing another petition for 180 days and seeking a discharge of their existing debts for two years. Judge Grube also did not continue a hearing to dismiss with the case with prejudice so the Walkers could retain counsel. The Walkers appealed and lost.
In the Walkers’ case they testified that they filed three of the cases to stop the garnishment of Mrs. Walker’s wages. The rest of the cases appear to have been filed to stop the collection of utilities by the City of Santa Clara and not make pre/post-petition mortgage payments on their home. Focusing on the ninth bankruptcy petition filed, this case was dismissed for the Walkers’ failure to complete the petition schedules and they also did not appear at the 341 Meeting of the Creditors.
So what is a willful failure to abide by the bankruptcy courts order under Section 109(g)? Unfortunately the Bankruptcy Code does not define the word or term willful. Courts have interpreted “willful” to mean deliberate or intentional. In re Herrera, 194 B.R. 178, 188 (N.D. Ill 1996). To determine is willful conduct took place a court can consider repeated failure to appear or lack of diligence as willful conduct. A court can infer from multiple dismissals and re-filing of bankruptcy petitions without a change in circumstances willful failure to comply with order of the bankruptcy court. In re Nelkovski, 46 B.R. 542, 545 (N.D.Ill. 1985).
In the Walker case the debtors filed nine petitions for relief and never completed the petitions or fully prosecuted the cases. Interestingly enough, there is no absolute bar against filing nine successive bankruptcy petitions or serial filings. Tsafaroff v. Taylor, 884 F.2d 478 (9th Cir. 1989). On appeal the Court agreed with Judge Grube and affirmed the dismissal for the Walkers’ repeated willful failures to follow the Court’s orders under Section 109(g)(1).
Dismissal of the Walkers’ Case With Prejudice
Section 349 of the Bankruptcy Code provides (a) unless the court, for cause, orders otherwise, the dismissal of a case under this title does not bar the discharge, in a later case under this title, of debts that were dischargeable in the case dismissed; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title, except as provided in section 109(g) of this title. So there you go. A court can for cause bar a debtor from filing an additional bankruptcy for a period of time or seeking a discharge of their debts listed in the dismissed case. In re Leavitt, 209 B.R. 935 (9th Cir. 1997). In order to have cause, the debtors conduct must have been “egregious;” a finding of bad faith constitutes egregious behavior. Leavitt 209 B.R. at 939. A Bankruptcy Court may dismiss a case with prejudice in order “to punish abusive or bad faith filing.” In re Leavitt, 209 B.R. at 939.
In evaluating a debtor’s history of filings and dismissals, it is useful to consider five factors: “(1) the time between the prior case and the present one; (2) whether the second case was filed to obtain the favorable treatment afforded by the automatic stay; (3) the effort made to comply with the prior case plan; (4) the fact that Congress intended the debtor to achieve its goals in a single case; (5) any other facts the court finds relevant.” In re Hureta, 137 B.R. 356, 367 (B.R. CD Cal.1992).
In the Walker appeal the court noted that the Walkers filed case after case over a six year period with nine of the petition within a four year period and the petition subject to appeal was filed only 24 days after the previous bankruptcy petition was dismissed. On appeal the court noted that the Walkers petitions were dismissed as follows: 3 for failure to appear at the meeting of creditors or appearing at a hearing regarding the chapter 13 plan; 3 were dismissed for failure to appear the 341 meeting of creditors; 1 for failure to make the Chapter 13 Plan payments; and for failure to comply with court orders to file appropriate papers and confirm chapter 13 plans. The
Walkers were determined to have filed the ninth bankruptcy petition in bad faith and were abusing the bankruptcy process.
Vexatious Litigant Determination
A little known area of the law is the All Writs Act, 28 U.S.C. Section 1651(a). Section 1651(a) provides: The Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.
I suppose this is the like the necessary and proper clause of Article I, Section 8 of the United States Constitution or Section 105(a) of the Bankruptcy Code. They potentially can allow the entity they refer to make any law, order or holding that is deemed proper. 28 U.S.C. Section 1651(a) is no different. It has been determined that Section 1651(a) allows the district court to enjoin litigants that abuse the court system. Tripati v. Beaman, 878 F.2d 351 (10th Cir. 1989); In re Oliver, 682 F.2d 443, 445 (3rd Cir. 1982). However, the conditions cannot be so burdensome as to deny a litigant meaningful access to the courts. Tripati, 878 F.2d at 352.
So the Walkers filing nine bankruptcy petitions in four years was an abuse and the number of dismissals for failure to prosecute the cases provides evidence and supports the conclusion that the Walkers’ were abusing the bankruptcy court system. There are six factors the court identified to help determine if a debtor is a vexatious litigant:
(1) the litigant’s history of litigation and in particular whether it entailed vexatious, harassing or duplicative lawsuits;
(2) the litigant’s motive in pursuing the litigation;
(3) whether the litigant is represented by counsel;
(4) whether the litigant has caused needless expense to other parties . . . or has posed an unnecessary burden on the courts and their personnel; and
(5) whether other sanctions would be adequate to protect the courts and other parties.
The ultimate consideration is “whether the litigant who has a history of vexatious litigation is likely to continue to abuse the judicial process . . . “ See Safir v. United States Lines, Inc., et. al., 792 F.2d 19, 23 (2nd Cir. 1986). The court of appeal wasted no time in determining the Walkers were in fact vexatious litigants and their access to filing more petitions should be restricted by applying the factors listed above. The Walkers’ petitions were duplicative, failed to prosecute all nine cases, they were not represented by counsel, caused needless expense to creditors and burdened the courts. Finally the court determined if the Walkers’ access was not restricted they would continue to file bankruptcy petitions. So the court of appeals ordered the Walkers be limited as follows: (1) the Walkers have to notify the clerk of the Bankruptcy Court if they desire to file a petition and they are vexatious litigants; (2) before the Walkers can file a petition the clerk shall lodge it with the General Duty Bankruptcy Judge and be granted leave to file; (3) once the petition is accepted for filing, the Walkers must obtain leave of the Bankruptcy Court to voluntarily dismiss the petition and (4) the order will remain in effect for 10 years without further order of the court.
So, 15 petitions filed since 2009 and the debtor listed below is still going strong. An interesting part of the history below is the time between the filing of the petitions. The debtors 13th case was dismissed in 2012, then the debtor comes back and files two cases in 2014, the 14th and 15th cases. So without spending too much time the debtor listed below has intermittently fallen within Section 109(g) and arguably depending upon the facts is not a vexatious litigant given the length of time between some of the filings. The debtor also properly received the benefit of the automatic stay in a number of the cases given the timing of filing. The bottom line is this debtor has not been barred from continuing to file bankruptcy petitions and there is probably a good reason why.
“Notice of Debtor’s Prior Filings for debtor XXXX XX Case Number 09-61041, Chapter 13 filed in California Northern Bankruptcy Court on 12/17/2009 , Dismissed for Failure to File Information on 01/06/2010; Case Number 11-58863, Chapter 13 filed in California Northern Bankruptcy Court on 09/23/2011 , Dismissed for Failure to File Information on 10/14/2011; Case Number 11-60087, Chapter 13 filed in California Northern Bankruptcy Court on 10/31/2011 , Dismissed for Other Reason on 11/16/2011; Case Number 14-54381, Chapter 13 filed in California Northern Bankruptcy Court on 10/28/2014; Case Number 09-59783, Chapter 13 filed in California Northern Bankruptcy Court on 11/09/2009 , Dismissed for Failure to File Information on 12/01/2009; Case Number 10-54170, Chapter 7 filed in California Northern Bankruptcy Court on 04/23/2010 , Dismissed for Failure to File Information on 06/08/2010; Case Number 10-59424, Chapter 13 filed in California Northern Bankruptcy Court on 09/10/2010 , Dismissed for Failure to File Information on 09/29/2010; Case Number 11-56990, Chapter 13 filed in California Northern Bankruptcy Court on 07/27/2011 , Dismissed for Failure to File Information on 08/12/2011; Case Number 10-57982, Chapter 13 filed in California Northern Bankruptcy Court on 08/02/2010 , Dismissed for Failure to File Information on 08/18/2010; Case Number 11-54700, Chapter 13 filed in California Northern Bankruptcy Court on 05/17/2011 , Dismissed for Failure to File Information on 06/02/2011; Case Number 12-50023, Chapter 13 filed in California Northern Bankruptcy Court on 01/03/2012 , Dismissed for Other Reason on 01/19/2012; Case Number 10-52271, Chapter 13 filed in California Northern Bankruptcy Court on 03/09/2010 , Dismissed for Failure to File Information on 03/24/2010; Case Number 11-55983, Chapter 13 filed in California Northern Bankruptcy Court on 06/27/2011 , Dismissed for Failure to File Information on 07/13/2011; Case Number 10-56584, Chapter 13 filed in California Northern Bankruptcy Court on 06/25/2010 , Dismissed for Failure to File Information on 07/14/2010.(Admin) (Entered: 11/26/2014)”