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THE FILING OF A BANKRUPTCY PETITION IN VIOLATION OF 11 U.S.C. § 109(g): DOES IT INVOKE

THE AUTOMATIC STAY?

Robert Lefkowitz*

INTRODUCTION The automatic stay gives bankrupt debtors “one of the most

powerful weapons known to the law,”1 halting all actions or proceedings by creditors to enforce a claim against that debtor.2 However, with this power comes debtor misuse. Abusive debtors file multiple bankruptcy petitions solely to take advantage of the automatic

* Notes Editor, Cardozo Law Review. J.D. Candidate (June 2005). The author would like to thank the members of the Cardozo Law Review who helped edit and shape this Note toward publication. Special thanks to Aaron Wright for his invaluable editing. The author would also like to thank Professor David Carlson for his guidance and comments. Above all, he would like to thank his parents, Rose and Ervin, for all their love and support, as well as his sister, Leah, for listening to him talk about bankruptcy when she had better things to do. 1 In re Russo, 94 B.R. 127, 129 (Bankr. N.D. Ill. 1988). 2 See 11 U.S.C. § 362(a) (2000), which provides eight types of actions that are immediately stayed upon the filing of the bankruptcy petition. It provides:

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title . . . operates as a stay, applicable to all entities, of— (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title; (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; (4) any act to create, perfect, or enforce any lien against property of the estate; (5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title; (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title; (7) the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and (8) the commencement or continuation of a proceeding before the United States Tax Court concerning the debtor.

Id.


298 CARDOZO LAW REVIEW [Vol. 26:1

stay’s power. These “serial filers” seek only to delay creditor action. Typically, when a creditor attempts to foreclose3 on the debtor’s residence, the debtor will file for bankruptcy without an intention to participate in the bankruptcy process. A bankruptcy court will dismiss the case, and the creditor will recommence foreclosure proceedings. In reaction, the debtor will again file for bankruptcy.4

These abusive filings plague bankruptcy courts. Recognizing the need for legislation, Congress provided courts with the authority to stop the process from repeating indefinitely. Section 109(g) of the Bankruptcy Code allows courts to characterize a debtor as abusive, thereby precluding the debtor from filing another bankruptcy petition for 180 days.5 However, Congress remained silent as to whether the automatic stay is invoked if the abusive debtor files a petition within the 180-day bar. As a result, bankruptcy courts have been divided on the issue. Some deny a debtor in violation of § 109(g) the benefit of the automatic stay; others invoke the automatic stay regardless of the § 109(g) violation.6

Confusion as to the proper approach led to splits within Circuits. In the Second Circuit, questions remain as to whether an abusive debtor in violation of § 109(g) receives the benefit of the automatic stay. In In re Casse,7 the Second Circuit appeared to hold that a filing in violation of § 109(g) does not invoke the automatic stay.8 Courts and commentators supported this proposition in subsequent cases and articles.9 However, a recent case from the Southern District of New York, In re Flores,10 interpreted In re Casse as standing for the proposition that a filing in violation of § 109(g) invokes the automatic stay.11

In an attempt to clarify the Second Circuit’s confusion, this Note will argue that abusive debtors in violation of § 109(g) should be precluded from gaining the benefit of the automatic stay by rejecting the rationale used by courts when holding that the automatic stay is invoked regardless of a § 109(g) violation.

Part I of this Note provides a background on the automatic stay, the

3 BLACK’S LAW DICTIONARY 658 (7th ed. 1999) (defining foreclosure as “[a] legal proceeding to terminate a mortgagor’s interest in property, instituted by the lender (the mortgagee) either to gain title or to force a sale in order to satisfy the unpaid debt secured by the property”). 4 See discussion infra Part I.B (providing a more detailed discussion of the process by which debtors misuse the automatic stay and abuse the bankruptcy process). 5 See discussion infra Part I.C (discussing 11 U.S.C. § 109(g)). 6 See discussion infra Part III. A-B (discussing this disagreement). 7 198 F.3d 327 (2d Cir. 1999). 8 See infra text accompanying notes 72-90 (discussing the decision in In re Casse). 9 See infra note 90 and accompanying text. 10 291 B.R. 44 (Bankr. S.D.N.Y. 2003). 11 See infra text accompanying notes 91-106 (discussing the decision in In re Flores).


2004] § 109(g) AND THE AUTOMATIC STAY 299

abusive filing problem, and how § 109(g) attempted to alleviate this problem. Part II examines the state of confusion in the Second Circuit, conducting a textual analysis of In re Casse and In re Flores. Part III outlines the split among courts with respect to whether the filing of a petition in violation of § 109(g) invokes the automatic stay. Part IV argues that the automatic stay is not invoked after a § 109(g) violation, and will present a series of arguments in favor of this rule, including an examination of the legislative history and a contextual analysis of § 109(g) within the Bankruptcy Code.

I. THE AUTOMATIC STAY, ABUSIVE FILINGS, AND SECTION 109(g)

A. The Automatic Stay

The automatic stay12 is a “fundamental debtor protection”13 and “cornerstone”14 of the Bankruptcy Code. Upon filing a bankruptcy petition, the automatic stay protects the debtor by halting all actions and proceedings by parties attempting to enforce a claim against the debtor.15

The automatic stay serves many different purposes.16 First, it gives the debtor a “breathing spell”17 from creditors, preventing the depletion 12 For a discussion of the origins of the automatic stay and its development to its current form, see 3 COLLIER ON BANKRUPTCY ¶ 362.LH (Lawrence P. King et al. eds., 15th rev. ed. 2003); 2 NORTON BANKRUPTCY LAW AND PRACTICE 2D § 36:1-36:4 (2d ed. 2004); In re Bradley, 38 B.R. 425, 427 (Bankr. C.D. Cal. 1984). In Bradley, the court summarized the important developments of the stay:

Novel as it may be, the stay has deep roots. The Bankruptcy Act of 1898 stayed lawsuits on dischargeable claims. Case law very early protected property in custodia legis. From these beginnings, the stay over the past half century has gone through a process of incremental extension. There are a number of episodes of which three are worth noting. The first was the extension of the stay, in reorganization proceedings, to property not in custodia legis. The second was the move from a discretionary stay, dependent on judicial action, to a stay that was wholly self-executing. The third was the extension and generalization of the stay, under the Bankruptcy Rules, from corporate reorganizations to other methods of nonliquidation relief. But none of these rules was as extensive as the rule reserved for corporate reorganizations under former Bankruptcy Rule 10-601. And in straight bankruptcy, the protection was narrower still. In any event, all this was swept away by the single, comprehensive stay of Section 362, 11 U.S.C. § 362 (1982).

38 B.R. at 427. 13 H.R. REP. NO. 95-595, at 340 (1977) [hereinafter House Report]. 14 In re Flores, 291 B.R. at 48. 15 See 11 U.S.C. § 362(a) (2000). 16 See House Report, supra note 13, at 340 (listing the purposes of the automatic stay); 2 NORTON BANKRUPTCY LAW AND PRACTICE 2D, supra note 12, at § 36:4 (same); Spencer Zane Baretz, Combating the Chapter 13 Serial Filer: An Argument for Orders Containing Prospective Relief from the Automatic Stay Provision, 25 HOFSTRA L. REV. 1315, 1317-18 (1997) (same). 17 House Report, supra note 13, at 340.



of the debtor’s assets.18 Second, it permits a debtor to construct a repayment or reorganization plan,19 which provides the debtor with a “fresh start,” one free from the financial pressures that drove the debtor into bankruptcy.20 Third, the automatic stay protects not only debtors but creditors as well.21 Without the stay, individual creditors would pursue their own remedies against the debtor’s property. There would be a race to the debtor assets, with creditors attempting to obtain satisfaction of their claims without regard to the other creditors.22 While the automatic stay provides many benefits, its power can be abused. Serial filing abuses the automatic stay by allowing bad faith debtors to use the stay to shield themselves from creditors.

B. The History of Serial Filing Prior to the Enactment of § 109(g)

Serial filing refers to a situation where a debtor, who does not

intend to participate in the bankruptcy process, files multiple bankruptcy petitions solely to invoke the automatic stay and delay a creditor from exercising its rights.23 Serial filing constitutes a “badge of

18 See In re Claussen, 118 B.R. 1009, 1014 (Bankr. D.S.D. 1990) (stating that without the automatic stay, “creditors would dissipate the debtor’s assets, causing piecemeal adjudication of a bankruptcy estate, impairing a realistic opportunity to reorganize, and damaging any orderly equitable distribution to creditors”). 19 See House Report, supra note 13, at 340; In re Robbins 964 F.2d 342, 345 (4th Cir. 1992) (stating that the automatic stay “gives the Bankruptcy Court the opportunity to harmonize interests of both debtor and creditors while preserving the debtor’s assets for repayment and reorganization of his or her obligations”). 20 See 2 NORTON BANKRUPTCY LAW AND PRACTICE 2D, supra note 12, at § 36:4 (“A debtor who seeks a fresh start is afforded a rehabilitation opportunity free from the financial pressures and problems which caused the debtor to seek relief under the Code.”). 21 See In re Parr Meadows Racing Ass’n, Inc., 880 F.2d 1540, 1545 (2d. Cir. 1989) (explaining that the automatic stay protects creditors “in a manner consistent with the bankruptcy goal of equal treatment, by ensuring that no creditor receives more than an equitable share of the bankrupt’s estate”). 22 See In re Fidelity Mortgage Investors, 550 F.2d 47, 55 (2d Cir. 1976) (stating that the automatic stay was designed to “prevent a chaotic and uncontrolled scramble for the debtor’s assets in a variety of uncoordinated proceedings in different courts,” and that the stay “insures that the debtor’s affairs will be centralized, initially, in a single forum in order to prevent conflicting judgments from different courts and in order to harmonize all of the creditors’ interests with one another”); House Report, supra note 13, at 340. 23 See In re McKissie, 103 B.R. 189, 191 (Bankr. N.D. Ill. 1989) (“The main effect of serial filing is to achieve a continuing reimposition of the automatic stay, thereby delaying exercise of creditors’ rights against their collateral.”); Kimberly L. Nelson, Abusive Filing: Can Courts Stop the Abuse Within the Confines of the Bankruptcy Code?, 17 BANKR. DEV. J. 331, 334-35 (2000) (describing the process by which a typical serial filer abuses the bankruptcy system); Constantine Dean Pourakis, Final Report of the Bankruptcy Foreclosure Scam Task Force, 7 AM. BANKR. INST. L. REV. 341, 341-43 (1999) (describing five scams serial filers use to abuse the bankruptcy system); Lex A. Coleman, Individual Consumer “Chapter 20” Cases After Johnson: An Introduction to Nonbusiness Serial Filings Under Chapter 7 and Chapter 13 of the Bankruptcy Code, 9 BANKR. DEV. J. 357, 363-74 (1992) (discussing various incentives serial filers have in



bad faith”24 and an “abuse”25 of the bankruptcy process, causing “problems ever since the concept of the voluntary petition was introduced in American bankruptcy law.”26 The challenge courts face is how to effectively deal with the problem of serial filers within the context of the Bankruptcy Code.

The following hypothetical outlines a common serial filing situation where the debtor attempts to delay a creditor’s foreclosure sale.27 Assume debtor, D, and local mortgage lender, C. D and C enter abusing the bankruptcy system). But see Susan L. DeJarnatt, Once Is Not Enough: Preserving Consumers’ Rights to Bankruptcy Protection, 74 IND. L.J. 455, 462-64 (1999) (arguing that the concern over the serial filer problem is “overblown” and that serial filers are not abusing the bankruptcy system). 24 In re Spectee Group Inc., 185 B.R. 146, 156 (Bankr. S.D.N.Y. 1995). In In re Spectee Group Inc, the court explained when serial filing constitutes bad faith: “Bad faith exists where the debtor lacks any realistic possibility of reorganization, and files the petition for the sole purpose of frustrating and delaying its secured creditor’s efforts to enforce its legitimate rights.” Id. at 155; see also In re Casse, 198 F.3d 327, 332 (2d Cir. 1999) (“Serial filers . . . are . . . among the Hannibal Lecters of current bankruptcy litigation.”). 25 See In re Kinney, 51 B.R. 840, 845 (Bankr. C.D. Cal. 1985) (“Where . . . debtors utilize the automatic stay without the intent or ability to reorganize their financial activities or effectuate a realistic repayment plan, they are abusing the bankruptcy system.”); 5 NORTON BANKRUPTCY LAW AND PRACTICE 2D, supra note 12, at § 125:5, describing the abusive filing problem:

A fertile area for dismissal of Chapter 13 cases involves what has come to be known as the multiple or “abusive” Chapter 13 filing. It is apparently not uncommon in some judicial districts for debtors to seek to thwart the collection efforts of creditors by filing multiple, successive bankruptcy petitions. Each time a petition is dismissed or relief from the stay is granted, the debtor files a new bankruptcy petition invoking the automatic stay and seeking to overcome the effect of dismissal or relief from the stay in the prior case.

26 See Final Report of the Bankruptcy Foreclosure Scam Task Force, at http://www. abiworld.org/Content/NavigationMenu/News_Room/Research_Center/Bankruptcy_Reports_Research_and_Testimony1/General1/finalreport_cdcalif_6_98.pdf (last visited Oct. 21, 2004) [hereinafter Foreclosure Scam Task Force] (discussing the hardships serial filers cause on bankruptcy courts, lenders, and innocent bystanders); Serial Filers a Problem in Texas, 7 CONSUMER BANKR. NEWS, July 2, 1998 (mentioning a survey conducted in all 50 states which found that “one of the most common and frustrating problems for states was the serial or repeat filer”); In re McKissie, 103 B.R. 189, 191 (Bankr. N.D. Ill. 1989) (“Serial filings . . . increase the cost to creditors who hire counsel. Moreover, serial filings add an increased burden to the already congested calendars of many bankruptcy courts.”). 27 See Foreclosure Scam Task Force, supra note 26, discussing the extent of the serial filer problem in delaying residential foreclosures:

[S]ome people have apparently created whole businesses out of the delay possibilities provided by the automatic stay. Advertising themselves as “foreclosure services” or “mortgage consultants,” these opportunists know that, once a foreclosure trustee learns that a bankruptcy petition has been filed, the sale will be delayed until relief from stay is obtained from the bankruptcy court. They also know that title companies will not insure foreclosure title without a lift stay order. Most make false promises or misrepresentations to the homeowners. For the period from petition filing to stay termination, the opportunity exists for these services to collect partial mortgage payments or rent in exchange for stalling the foreclosure. In addition, some individuals indulge in serial filings on their own or with relatives.

See also Baretz, supra note 16, at 1318, describing the hardships caused by serial filers on mortgagees:

Given the effort and expense invested in foreclosure proceedings, the hardships caused



into a transaction whereby D conveys a mortgage28 to C. After failing to abide by the terms of the mortgage, C declares D in default and begins state foreclosure proceedings.29 To avoid losing his home, D files a Chapter 1330 bankruptcy petition a day before the foreclosure sale,31 thereby invoking the automatic stay.32 Fearing a violation of the automatic stay, C does not proceed with the foreclosure sale. As the bankruptcy case proceeds, D does not participate in the bankruptcy process.33 He fails to appear at the creditor meeting,34 leading to a

by serial filers are particularly burdensome on foreclosing mortgagees. These efforts include issuing a complaint or petition to foreclose; notifying all interested parties; coordinating the time, place, and terms of the sale; hiring an officer to conduct the sale; and advertising the sale.

28 BLACK’S LAW DICTIONARY, supra note 3, at 1026 (defining mortgage as “[a] lien against property that is granted to secure an obligation (such as a debt) and that is extinguished upon payment or performance according to stipulated terms”). 29 For information on state foreclosure proceedings, see generally SIDNEY A. KEYLES, FORECLOSURE LAW & RELATED REMEDIES: A STATE BY STATE DIGEST (1995) (summarizing the laws in each state of issues relating to that state’s foreclosure process); MORTGAGES AND MORTGAGE FORECLOSURE IN NEW YORK (1961). 30 Chapter 13 of the Bankruptcy Code permits a debtor to reorganize his debts by proposing a plan which sets out how he desires to pay his creditors. See 8 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 1300.01. For more information on Chapter 13 bankruptcy proceedings, see generally id. at ¶ 1300.01-97; ROBERT E. GINSBERG & ROBERT D. MARTIN, 2 GINSBERG & MARTIN ON BANKRUPTCY, Part XV (4th ed. 1998).

31 See, e.g., In re Felberman, 196 B.R. 678, 680-681 (Bankr. S.D.N.Y. 1995) (debtor filed his first Chapter 13 petition the day of a scheduled foreclosure sale, and his second, third, and fourth Chapter 13 petition the day before the rescheduled foreclosure sales); In re Eatman, 182 B.R. 386, 390 (Bankr. S.D.N.Y. 1995) (debtor filed bankruptcy petition the day of the scheduled foreclosure sale); In re Prud’homme, 161 B.R. 747, 748 (Bankr. E.D.N.Y. 1993) (debtor filed first Chapter 13 petition the day before foreclosure sale, the second petition on the eve of the rescheduled sale, and the third on the day of the rescheduled sale). 32 See Coleman, supra note 23, at 368, providing a more detailed discussion of this series of events:

When a debtor defaults on a mortgage secured by the debtor’s principal residence . . . the mortgagee typically accelerates payments and declares the entire outstanding balance due. If the debtor is unable to pay the accelerated amount on demand, generally the mortgagee exercises its state law right to foreclose on the encumbered property . . . by initiating judicial foreclosure proceedings . . . Where the collateral is the debtor’s principal residence, the debtor incurs a substantial risk of suddenly losing the debtor’s home. The debtor may temporarily or permanently interrupt this foreclosure process, however, by filing a chapter 7 or chapter 13 petition under the Bankruptcy Code.

33 In typical examples, the serial filer will fail to perform many of the statutory obligations required of him under the Bankruptcy Code, such as failing to file the required plan or schedules, failing to attend the meeting of creditors, or failing to make payments under the plan. See, e.g., Nelson, supra note 23, at 334 (stating that a typical serial filer will “file a ‘face’ petition, which generally does not contain completed schedules as required by the Code but only the barest of paperwork to qualify as a bankruptcy petition”); see also In re Robinson, 198 B.R. 1017, 1020 (Bankr. N.D. Ga. 1996) (debtor filed a petition to prevent foreclosure and then failed to make plan payments to the Chapter 13 trustee); In re Prud’homme, 161 B.R. 747, 750 (Bankr. E.D.N.Y. 1993) (debtor filed a petition without the schedule or plan solely to stave off foreclosure). In discussing the problem of abusive filings, the Prud’homme court stated that “in the typical case schedules are not timely or indeed ever filed, the debtor does not participate in the proceeding, [and] the debtor fulfills few if any of his or her statutory obligations.” Id.; Common



dismissal of his case.35 Accordingly, C recommences foreclosure proceedings.36 Ninety days later, on the eve of the foreclosure sale, D files a second bankruptcy petition. The petition invokes the stay, further delaying the sale. However, D again fails to participate in the bankruptcy process. After the court dismisses the action, D will again file, creating a theoretically endless cycle.37

However, once a court recognizes that a debtor filed the petition in bad faith,38 the court employs numerous remedies to deal with this problem. Courts dismiss the case,39 impose sanctions,40 or provide

Characteristics of Various Fraudulent and Criminal Bankruptcy Schemes, 7 CONSUMER BANKR. NEWS, Aug. 28, 1997 (listing common characteristics found in a serial filer scheme, including debtor filing a high number of cases in a short period of time, failing to disclose prior bankruptcy cases, and failing to fund a plan). 34 Under 11 U.S.C. § 341 (2000), the debtor is required to attend the meeting of creditors that is convened by the trustee. See, e.g., In re Montgomery, 37 F.3d 413, 414 (8th Cir. 1994); In re Herrera 194 B.R. 178, 183 (Bankr. N.D. Ill. 1996) (debtor filed a petition to prevent foreclosure and then failed to attend meeting of creditors); Robinson, 198 B.R. at 1020. But see In re Nelkovski, 46 B.R. 542, 544 (Bankr. N.D. Ill. 1985) (stating that failure to attend meeting of creditors is not, in itself, bad faith conduct). 35 See, e.g., Montgomery, 37 F.3d at 414 (case dismissed for failure to attend creditors meeting); In re Roderick, 20 B.R. 485, 486 (Bankr. D.R.I. 1982). 36 When a bankruptcy case is dismissed, the automatic stay terminates thereby allowing the creditor to recommence foreclosure proceedings. See 11 U.S.C. § 362(c) (“[T]he [automatic] stay . . . continues until . . . the time the case is dismissed.”). 37 See In re Felberman, 196 B.R. 678, 680-81 (Bankr. S.D.N.Y. 1995) (debtor was able to delay a foreclosure sale four times by filing for bankruptcy each time before the scheduled sale and then failing to participate in the bankruptcy process); Prud’homme, 161 B.R. at 748 (debtor delayed foreclosure sale three times). 38 Often a court will not be able to determine whether a debtor is filing merely to use the automatic stay until the second or third abusive petition has been filed. See Nelson, supra note 23, at 336, explaining the reason for this occurrence:

One problem creditors confront is that it is not apparent on the face of a petition that a bankruptcy filing is an abusive one or that a petition filed the day of a foreclosure sale is not filed in good faith. As in the case of an abusive filing, many petitions filed in good faith are also filed the day before foreclosure due in part to debtor’s searching for alternative methods of preventing foreclosure . . . many bankruptcy petitions that are filed in good faith are likewise filed without supporting papers due to some other urgent need for protection under the automatic stay.

39 Under 11 U.S.C. § 1307(c), courts have authority to dismiss a Chapter 13 case “for cause.” See 11 U.S.C. § 1307(c) (2000). Pre-109(g) courts have used § 1307(c) to dismiss abusive filings. See, e.g., Roderick, 20 B.R. at 486 (dismissing the case “for cause” under 1307(c) where debtor filed two chapter 13 petitions in order to delay foreclosure sale and then failed to attend creditors meetings); 5 NORTON BANKRUPTCY LAW AND PRACTICE 2D, supra note 12, at § 125:5 (“[C]ourts have not hesitated to find ‘cause’ for dismissal under Code § 1307 when the Chapter 13 debtor is found to have filed multiple or abusive bankruptcy cases.”); see also In re Thirtieth Place, Inc., 30 B.R. 503, 506 (B.A.P. 9th Cir. 1983) (dismissing case where petition was filed solely to invoke the automatic stay and “subvert the legitimate rights of creditors in the absence of any reasonable expectations that the debtor can successfully reorganize”); In re Mildevco, Inc., 40 B.R. 191, 194 (Bankr. S.D. Fla. 1984) (dismissing the case after finding a “lack of good faith” in filing the petition where the debtor filed a petition to prevent foreclosure); In re Herndon Executive Center, Inc., 36 B.R. 803, 807 (M.D. Fla. 1984); In re Hill, 34 B.R. 21, 21-22 (Bankr. M.D. Fla. 1983) (dismissing the case “on the ground that it was deemed to be and is an abusive filing” where the debtor filed second bankruptcy petition solely to delay foreclosure sale);



creditors with relief from the automatic stay.41 However, these remedies do not stop serial filing. As the above hypothetical demonstrates, if a given court dismisses the debtor’s case, ending the automatic stay, the creditor may recommence foreclosure.42 However, prior to the second foreclosure sale, the debtor would again file a petition, thereby invoking the stay and again delaying the sale.43 On the other hand, if a creditor seeks relief from the automatic stay, the smart debtor would voluntarily dismiss his case44 prior to the motion being granted, thereby terminating the stay and allowing the creditor to recommence foreclosure proceedings. As the foreclosure sale becomes imminent, the debtor would file another petition, invoking the protection of the automatic stay.45 Through this scheme bad faith debtors continuously thwart a creditor’s foreclosure efforts.46

Nelson, supra note 23, at 339 (discussing bankruptcy court’s authority to dismiss cases filed in bad faith). 40 Courts have imposed sanctions on serial filers pursuant to Bankruptcy Rule 9011. Bankruptcy Rule 9011 provides that every petition filed under the Code shall be signed by the attorney who verifies that the petition “is not being presented for any improper purpose, such as to harass or to cause unnecessary delay, or needless increase in the cost of litigation.” FED. R. BANKR. P. 9011; see In re Jones, 41 B.R. 263, 268 (Bankr. C.D. Cal. 1984) (pre-109(g) case where the court used Bankruptcy Rule 9011 to impose sanctions on the debtor and his attorney when the debtor filed six bankruptcy petitions to delay foreclosure); In re Gary, 38 B.R. 675, 677 (Bankr. D. Md. 1984); In re 2218 Bluebird Ltd. P’ship, 41 B.R. 540, 546 (Bankr. S.D. Cal. 1984) (court used inherent powers to impose sanctions on abusive filer); In re Bystrek, 17 B.R. 894, 895 (Bankr. E.D. Pa. 1982) (holding debtor’s attorney in contempt of court and imposed a monetary sanction on him for “fraudulent and vexatious behavior” after filing a petition to delay foreclosure); Pourakis, supra note 23, at 352 (discussing bankruptcy court’s use of Bankruptcy Rule 9011 to impose sanctions on serial filers). 41 Under 11 U.S.C. § 362(d) (2000), the bankruptcy court has authority to grant relief from the automatic stay. It provides: “[O]n request of a party in interest and after notice and a hearing, the court shall grant relief from the stay . . . such as by terminating, annulling, modifying, or conditioning such stay . . . for caus[e].” Id. Pre-109(g) courts often dealt with bad faith filers by granting relief from the stay under § 362(d). See, e.g., In re Lotus Invest., Inc., 16 B.R. 592, 595-96 (Bankr. S.D. Fla. 1981) (granting creditor relief from the automatic stay under § 362(d) finding that “lack of ‘good faith’ in filing a petition . . . entitles a secured creditor to relief from the stay”); In re Victory Constr. Co., 9 B.R. 549, 560 (Bankr. C.D. Cal. 1981) (holding that “the debtor’s lack of ‘good faith’ in filing a case . . . is ‘cause’ . . . to vacate the automatic stay under § 362(d)(1)”). 42 See supra text accompanying note 36. 43 See supra text accompanying note 37. 44 See 11 U.S.C. § 1307(b) (2000), which allows a debtor to voluntarily dismiss a Chapter 13 case at any time. It states: “On request of the debtor at any time, if the case has not been converted . . . the court shall dismiss a case under this chapter.” Id.; see also In re Jones, 41 B.R. 263, 266 (Bankr. C.D. Cal. 1984) (“The practice of multiple filings has been particularly flagrant in Chapter 13 cases, due in part to the ability of the debtor . . . to dismiss the case at any time pursuant to 11 U.S.C. 1307.”). 45 See, e.g., In re Bigalk, 813 F.2d 189, 190 (8th Cir. 1987) (debtors filed three Chapter 13 bankruptcy petitions, which they then voluntarily dismissed when the creditor sought relief from the stay in order to foreclose); In re Rankin, 288 B.R. 201, 202-03 (Bankr. E.D. Tenn. 2003) (debtor filed two petitions to delay foreclosure and voluntarily dismissed each one). 46 See In re Bystrek, 17 B.R. 894, 896 (Bankr. E.D. Pa. 1982) (calling this scheme a “farcical process” and “utterly ridiculous”).



C. 11 U.S.C. § 109(g)

To address the serial filer dilemma, Congress enacted § 109(g).47

This section addressed certain tactics of abusive debtors. Pursuant to § 109(g)(1), a debtor who “willful[ly]48 fail[s] . . . to abide by orders of the court, or to appear before the court in proper prosecution of the case” and suffers dismissal of his case as a result is ineligible for relief under the Bankruptcy Code for 180 days.49 Under § 109(g)(2), a debtor who “obtain[s] the voluntary dismissal of [his] case following the filing of a request for relief from the automatic stay” is likewise ineligible for relief for 180 days.50 This provides courts with a mechanism to control 47 Under the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. 98-353, 98 Stat. 333, 352 (1984), subsection (f) was added to § 109. It was later changed to subsection (g) by the Chapter 12 provisions in § 253 of the Bankruptcy Act of 1986. Throughout this Note, this section will be referred to as § 109(g). 11 U.S.C. § 109(g) reads:

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.

48 There has been considerable discussion over the meaning of the word “willful” in § 109(g)(1). See 2 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 109.08 (“For willfulness to be found there must be more than simply inadvertence or even reckless disregard for the debtor’s duties . . . The court must look to the circumstances of the particular case to determine willfulness.”); 1 NORTON BANKRUPTCY LAW AND PRACTICE 2D, supra note 12, at § 18:14 (“[W]here the debtor demonstrates a pattern of lack of diligence, including the failure to attend hearings, the failure to file documents or schedules, or the repeated failure to attend the administration of the Chapter 13 case, the courts have found ‘willfulness’ sufficient to bar refiling under § 109(g)(1).”); In re King, 126 B.R. 777, 781 (Bankr. N.D. Ill. 1991):

[T]he § 109(g) phrase “willful failure of the debtor . . . to appear before the court in proper prosecution of the case” includes willful and deliberate failure of debtors to perform their duties, whether in Chapter 11 to file schedules and Statement of Affairs, or in Chapter 13 to make Plan payments to the Trustee, or in any case to attend statutory meetings of creditors. The provision would not be the meaningful tool intended by Congress if “appear before the court” meant they could thumb their noses at their duties so long as they come into court on dates set.

49 See 11 U.S.C. § 109(g)(1) (2000). 50 See 11 U.S.C. § 109(g)(2). Although a seemingly straightforward prohibition, there are many intricacies within § 109(g)(2). For example, “if a case is involuntarily dismissed after a motion for relief from the stay is filed, the section is not applicable.” 2 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 109.08. Another issue involves whether the use of the word “following” in § 109(g)(2) implies a causal connection between a motion for relief and the dismissal. As stated in a leading bankruptcy treatise:

[W]hen the dismissal of the first case is remote in time from the motion for stay relief—perhaps, years after it was filed—section 109(g) should not be automatically applied. Quite arguably, Congress’s use of the word “following” in section 109(g), rather than “after,” indicates its intent that there be some causal relationship between the motion for relief and the dismissal. Certainly, the purpose of preventing abusive



the serial filer. Recall the above hypothetical, where D initially filed a Chapter 13

petition and took no further actions. When the court dismissed the debtor’s first action, the creditor recommenced the foreclosure proceedings. D then filed a second petition, failing again to participate in the bankruptcy process.51 In dismissing the case, the court can characterize D’s failure to participate in the process as a “willful failure of the debtor to abide by orders of the court,” thereby making D ineligible under § 109(g)(1).52 D will then be ineligible for 180 days to file a petition and obtain relief under the Bankruptcy Code.53 If, on the other hand, the court chooses to grant relief from the stay, and D voluntarily dismisses his case, D will also be ineligible to file a petition and obtain relief for 180 days pursuant to § 109(g)(2).54 C will then have 180 days to complete the foreclosure sale unimpeded by D’s abusive tactics.

However, § 109(g) does not deal with the situation where a debtor files a petition without regard to the 180-day bar. In the context of the above hypothetical, suppose after the second filing D failed to

refilings is not served when the motion for relief and the dismissal are totally unrelated. 2 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 109.08. For an interesting and detailed discussion of all the intricacies of § 109(g)(2), see Harry Wright, Must Courts Apply Section 109(g)(2) When Debtors Intend No Abuse in an Earlier Dismissal of Their Case?, 7 BANKR. DEV. J. 103, 111-20 (1990), discussing the wide range of issues that have confronted courts with respect to § 109(g)(2), including “whether the application of Section 109(g)(2) is mandatory or discretionary[,] whether there has to be a causal relationship between a creditor’s request for relief and a debtor’s request for dismissal[,] and . . . what is a ‘voluntary dismissal’ for purposes of Section 109?” Id. at 105. 51 Suppose, for example, D fails to make payments under the plan. Under 11 U.S.C. § 1326(a)(1) (2000), the debtor must commence making the plan payments to the Chapter 13 trustee within thirty days after the plan is filed. See, e.g., In re Patel, 48 B.R. 418, 419 (Bankr. M.D. Ala. 1985) (debtor filed a petition to stave off foreclosure and then failed to make plan payments); In re Herrera, 194 B.R. 178, 183 (Bankr. N.D. Ill. 1996). 52 See, e.g., In re Flores, 291 B.R. 44, 47 (Bankr. S.D.N.Y. 2003) (dismissing debtor’s second petition “pursuant to . . . Section 109(g) . . . for failure to comply with the Orders of this Court” where debtor filed multiple petitions to delay foreclosure and then failed to make payments under the plan); In re Bono, 70 B.R. 339, 341 (Bankr. E.D.N.Y. 1987) (dismissing petition for “willful failure to make payments,” thereby making the debtor ineligible under § 109(g)(1) to file a petition for 180 days). 53 See 2 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 109.08 (“The debtor who willfully fails to appear as required or disobeys the courts orders and suffers dismissal of the case as a result is explicitly prevented from immediately filing another petition; under such circumstances, immediate refiling would thwart the court’s effort to preserve its authority.”). 54 See id. (“The debtor who obtains voluntary dismissal of the case when faced with a motion for relief from the section 362 automatic stay, or after such relief has been granted, may not immediately refile and thereby frustrate creditors’ attempts at having their rights adjudicated within a reasonable time.”); see, e.g., In re Bigalk, 813 F.2d 189, 190 (8th Cir. 1987). In Bigalk, the debtor delayed a foreclosure sale three times by filing a petition prior to each foreclosure sale, and then voluntarily dismissing the case after the creditor filed a motion for relief from the stay. When the debtor filed a petition prior to the fourth foreclosure sale, the court immediately dismissed the case, stating the debtor was ineligible to file under § 109(g)(2), and allowing the foreclosure sale to proceed.



participate in the bankruptcy process. The court dismisses the case pursuant to § 109(g)(1) for the debtor’s “willful failure . . . to abide by orders of the court.”55 C schedules another foreclosure sale. On the eve of the sale and within 180 days of the dismissal order, D files another bankruptcy petition.56 Relying on § 109(g), C determines that he can proceed with the foreclosure sale without violating the automatic stay, because of the debtor’s ineligibility to obtain relief pursuant to § 109(g).57 D will then seek to void58 the foreclosure sale as violating the automatic stay. Once the court determines that D is ineligible under § 109(g),59 (i.e., that the prior dismissal was based on a “willful failure to 55 11 U.S.C. § 109(g). 56 A clerk will accept the petition despite the fact that the filing may be within a 180-day refiling bar because “no system exists by which court clerks can check, at the moment of filing, for a bar against that debtor on filing further petitions.” Nelson, supra note 23, at 340. 57 See, e.g., Flores, 291 B.R. at 47; In re McKay, 268 B.R. 908, 909 (Bankr. W.D. Va. 2001); Rowe v. Ocwen Fed. Bank & Trust (In re Rowe), 220 B.R. 591, 594 (E.D. Tex. 1997). 58 BLACK’S LAW DICTIONARY, supra note 3, at 1568 (defining void as “of no legal effect”). See 3 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 362.11 (“Most courts have held that actions taken in violation of the stay are void and without effect.”). 59 In the context of the above hypothetical, the prior dismissal order specifically stated that the case is being dismissed pursuant to § 109(g)(1) for the debtor’s willful failure to abide by orders of the court. In such a situation, the finding of willfulness is conclusive and the subsequent court will not have to relitigate the issue of willfulness in determining that the debtor is ineligible under § 109(g). It will simply have to count to see if 180 days has passed. See 1 KEITH M. LUNDIN, CHAPTER 13 BANKRUPTCY § 21.1 (3d ed. 2000); see, e.g., In re Bono, 70 B.R. 339, 342 (Bankr. E.D.N.Y. 1987), where the dismissal order quoted § 109(g) and dismissed case for “willful failure . . . to abide by orders of the Court, or to appear before the court in proper prosecution of the case.” The debtor refiled within 180 days and in dismissing the case, the court stated:

If the bankruptcy court, in dismissing the case, has heard and resolved the issue of willfulness, collateral estoppel requires that its determination be given conclusive effect in any subsequent proceeding. . . . Giving conclusive effect to the determination of willful failure in the earlier proceeding is not only dictated by well established principles of issue preclusion, but is most consistent with the language of § 109(g) and the purposes it was intended to serve. The court best qualified to determine why it is dismissing a proceeding is the court doing the dismissing. If that court declares that the dismissal is for “willful failure,” no other court should be allowed to find that it was for some other reason. . . . To permit a second court to inquire into the reasons why the first court acted, when the latter had stated them clearly itself, produces exactly the kind of delay and expense which § 109(g) was enacted to stop.

Id. at 342-43. Often, however, § 109(g)(1) is not mentioned at the time the initial case is dismissed and is only brought up upon a motion to dismiss the subsequent case. Suppose, for example, in the hypothetical above, after D failed to participate in the bankruptcy case, the court dismissed the case for failure to attend the creditors meeting but did not mention willfulness. If D files again to delay another foreclosure within 180 days of the prior dismissal, C can file a motion with the court claiming the debtor is ineligible under § 109(g)(1). The court will then have to determine whether D’s actions in the prior case was “willful” within the meaning of § 109(g)(1). See, e.g., In re Pike, 258 B.R. 876, 882 (Bankr. S.D. Ohio 2001), discussing when courts make a willfulness determination:

Section 109(g) does not specify the time when the finding of a willful failure by the debtor must be made . . . the vast majority of courts that have considered the issue have concluded that willfulness may be found either at the time of dismissal, or in a



abide by orders of the court or appear in proper prosecution of the case”60) it will dismiss the bankruptcy case.61

However, does the petition filed by the ineligible debtor invoke the automatic stay? If the ineligible debtor’s petition invokes the automatic stay, the creditor will be guilty of violating a valid stay. The sale will be void and the creditor will be liable for sanctions.62 If the automatic stay is not invoked, the sale will be valid and an abusive debtor will be stopped.

Courts disagree about this issue. Some courts hold that the filing of a petition in violation of § 109(g) is void ab initio,63 precluding the automatic stay’s invocation.64 Others hold the petition valid, invoking

subsequent case, when the court is called upon to determine if the earlier dismissal renders the debtor ineligible under Section 109(g).

See also 2 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 109.08: Normally, the court, in dismissing the first case, has no reason to determine whether the debtor’s failure to appear or obey court orders was willful; therefore, the debtor usually is not put on notice that the court may consider the issue of willfulness at a dismissal hearing in the subsequent case . . . typically the issue is raised by a motion to dismiss the subsequent case.

1 LUNDIN supra, § 21.1, at 21-9 (“Given that willfulness is a finding of fact that requires evidence, most bankruptcy courts are disinclined to conduct evidentiary hearings on the § 109(g) criteria at a routine dismissal hearing.”). With respect to § 109(g)(2), it will often not be certain whether the debtor was ineligible under § 109(g)(2) until the subsequent court makes that determination. Even though the debtor may have voluntarily dismissed his case “following the filing of a request for relief from the automatic stay,” and would thus seem to fall within the prohibited language of § 109(g)(2), the subsequent court will often fail to apply the section in cases that lacked evidence of abuse. See Wright, supra note 50, at 112-114 (discussing how a number of courts recognize that the purpose of § 109(g) was to prevent abusive filings and would refuse to apply § 109(g)(2) in cases that lacked evidence of abuse). 60 11 U.S.C. § 109(g)(1) (2000). If this were a § 109(g)(2) case, the court would determine if the “debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay,” and if so it would dismiss the case accordingly. 11 U.S.C. § 109(g)(2). 61 See, e.g., Flores, 291 B.R. at 63; Rowe, 220 B.R. 591, 594-95 (E.D. Tex. 1997); Miller v. First Fed. Savings & Loan Ass’n (In re Miller), 143 B.R. 815, 816 (Bankr. W.D. Pa. 1992); In re Bigalk, 813 F.2d 189, 190 (8th Cir. 1987); In re Denson, 56 B.R. 543, 546 (Bankr. E.D. Pa. 1986). 62 See 11 U.S.C. 362(h) (“An individual injured by any willful violation of a stay . . . shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”); Donna Renee Tobar, The Need for a Uniform Void Ab Initio Standard for Violations of the Automatic Stay, 24 WHITTIER L. REV. 3, 15-23 (2002) (discussing various sanctions that can be imposed on a creditor who violates the stay, including civil and criminal contempt orders, actual damages to the debtor, and punitive damages); 3 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 362.11 (“A violation of the stay is punishable as contempt of court. Most courts will impose contempt sanctions for a knowing and willful violation of a court order, and the automatic stay is considered as equivalent to a court order.”). 63 BLACK’S LAW DICTIONARY, supra note 3, at 1568 (defining void ab initio as “[n]ull from the beginning”). 64 Many cases hold that the automatic stay is not invoked upon a filing that is in violation of § 109(g). See In re McKay, 268 B.R. 908, 911 (Bankr. W.D. Va. 2001) (“[I]t is the decision of this Court that the purported filing [in violation of 109(g)] was a nullity ab initio and did not invoke the automatic stay.”); In re Hollberg, 208 B.R. 755, 756 (Bankr. D.D.C. 1997); Miller, 143 B.R.



the automatic stay.65 The following section examines where the Second Circuit stands with respect to this issue.

II. STATE OF THE LAW IN THE SECOND CIRCUIT

Confusion surrounds the Second Circuit’s interpretation of §

109(g) and its effect on whether or not the automatic stay should be granted to serial petitioners. In In re Casse,66 the Second Circuit denied a serial filer the benefit of the automatic stay.67 Courts and leading treatises consistently read In re Casse as holding that a petition filed by a debtor in violation of § 109(g) does not invoke the automatic stay.68 However, recently, in In re Flores,69 the Southern District of New York held that In re Casse stood for the proposition that a filing in violation of § 109(g) invokes the automatic stay.70 Close examination of the text in the In re Casse opinion reveals the reasonableness of the In re Flores’ interpretation.71

In In re Casse, the debtors owned a home encumbered by a mortgage.72 After the debtors defaulted on their mortgage payments, the mortgagee instituted foreclosure proceedings.73 The debtors delayed the foreclosure proceedings through the filing of three separate Chapter 1174 bankruptcy petitions.75 The court dismissed the third case “with

at 820 (“A debtor who files a subsequent bankruptcy petition in violation of 11 U.S.C. § 109(g)(1) has no standing to obtain any relief form that filing, including the automatic stay.”); In re Walker, 171 B.R. 197, 202 (Bankr. E.D. Pa. 1994) (“At the outset, we note that a filing contrary to § 109(g) is void ab initio [italics in original] and does not effect a valid automatic stay.”); In re Prud’homme, 161 B.R. 747, 751 (Bankr. E.D.N.Y. 1993) (“Where a debtor’s lack of entitlement under § 109(g) is clear and unquestioned, the filing is void ab initio [italics in original] and there exists no automatic stay for this court to address.”). 65 Many other cases, however, hold that the automatic stay is invoked. See Flores, 291 B.R. at 46 (holding that orders entered by this court dismissing cases with prejudice for 180 days pursuant to § 109(g) “are not intended and will not be construed to void the automatic stay in the event of a subsequent filing by the debtor within 180 days”); Shaw v. Ehrlich, 294 B.R. 260, 267 (Bankr. W.D. Va. 2003), aff’d, In re Wiencko, 2004 U.S. App. LEXIS 10174 (4th Cir. 2004) (“The only interpretation of the automatic stay provision of the Bankruptcy Code that meshes with the overall structure and operation of the Code is therefore one that understands the automatic stay to arise immediately upon the filing of the bankruptcy petition.”). 66 198 F.3d 327 (2d Cir. 1999). 67 See text accompanying notes 72-90 (discussing the decision in In re Casse). 68 See infra note 90 and accompanying text. 69 291 B.R. 44 (Bankr. S.D.N.Y. 2003). 70 See infra text accompanying notes 91-106 (discussing the decision in In re Flores). 71 See infra text accompanying notes 107-12 (analyzing the text of the In re Casse opinion to discern its true holding). 72 219 B.R. 657, 659 (Bankr. E.D.N.Y. 1998). 73 Id. at 658. 74 “Chapter 11 of the Bankruptcy Code provides an opportunity for a debtor to reorganize its business or financial affairs or to engage in an orderly liquidation of its property.” 7 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 1100.01. For more information on Chapter 11 bankruptcy



prejudice,”76 after recognizing the debtors’ true intention—frustrating the foreclosure proceedings. Two months later, on the eve of the fourth scheduled foreclosure sale, the debtor filed a Chapter 13 bankruptcy petition.77 In reliance on the previous order dismissing the case “with prejudice,” the mortgagee proceeded with the foreclosure sale.78 In response, the debtor filed a motion to vacate the sale as a violation of the automatic stay.79 The bankruptcy court determined that dismissal “with prejudice”80 barred the debtor from filing another bankruptcy petition,81 and therefore denied the debtor’s motion to vacate the sale.82 The district court affirmed the bankruptcy court’s opinion and the Second Circuit Court of Appeals affirmed the district court.83

In the Second Circuit’s opinion, Judge Haight agreed with the bankruptcy court that the “dismissal with prejudice” barred a subsequent filing.84 In describing how the filing of a bankruptcy petition in violation of such an order should be treated and its effect on the automatic stay, Judge Haight stated: “[T]he bankruptcy court’s treatment of the debtor’s Chapter 13 filing as void ab initio is consistent with established authority.”85 As an example of established authority, Judge Haight cited the following quote from In re Rowe:86

The bankruptcy court also stands on solid footing in refusing

proceedings, see generally id. at ¶ 1101-174; REORGANIZATIONS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, C. EDWARD DOBBS (1980); ROBERT E. GINSBERG & ROBERT D. MARTIN, 1 GINSBERG & MARTIN ON BANKRUPTCY, Part XIII (4th ed. 1998).

75 Casse, 219 B.R. at 659-60. 76 Id. at 660; see In re Robinson, 198 B.R. 1017, 1022 (Bankr. N.D. Ga. 1996) (explaining the meaning of a “dismissal with prejudice”: “The usual remedy for a bad faith filing is a dismissal pursuant to § 109(g), which works to prohibit the filing by a debtor of any case under Title 11 for a period of 180 days (citation omitted). Such a dismissal is frequently and imprecisely referred to . . . as a ‘dismissal with prejudice.’”). 77 Casse, 219 B.R. at 660. 78 Id. 79 Id. 80 Id. at 661-62. Bankruptcy courts often use the term “dismissal with prejudice” for two distinct purposes. See In re Tomlin, 105 F.3d 933, 938-39 (4th Cir. 1997) (“[T]he Bankruptcy Code provides a bankruptcy court with authority both to bar subsequent discharge of existing debt and to bar successive petitions under § 109(g). Although the two sanctions differ dramatically in purpose and effect, bankruptcy courts often refer to both sanctions as dismissals ‘with prejudice.’”); Nancy B. King, A Secret Weapon: § 349(a) “Dismissal With Prejudice,” NORTON BANKR. L. ADVISER 8 (Feb. 1998) (“‘Dismissal with prejudice’ sometimes is used to mean a bar to discharge of then-existing debts. Other times it is used for the more limited effect of a prohibition on refiling.”). Thus, the court had to determine which purpose the order was used for, and it decided that the dismissal was a bar on refiling. 81 See Casse, 219 B.R. at 665 (“The instant Chapter 13 case was filed in violation of the Order dismissing the Debtor’s third Chapter 11 case ‘with prejudice.’ The Debtor was thus ineligible to file under any chapter of the Bankruptcy Code.”). 82 Id. 83 In re Casse, 198 F.3d 327, 329 (2d Cir. 1999). 84 Id. at 334. 85 Id. at 342. 86 220 B.R. 591 (E.D. Tex. 1997).



to void the foreclosure sale of Rowe’s house. After finding that Rowe’s petition was filed in bad faith, the bankruptcy court used its authority under 11 U.S.C. §362(d) to lift the automatic stay ab initio. By doing so, the court validated the foreclosure sale of Rowe’s house. The court’s obvious rationale in lifting the stay ab initio was, because Rowe’s Chapter 13 petition was filed in bad faith and in violation of the 180-day ban, the petition was a nullity and consequently, the automatic stay never actually came into effect.87

The above quote appears to mean that the petition filed in violation of the refiling bar is void from the beginning and no automatic stay comes into effect, such as evidenced through the plain meaning of “void ab initio,”88 “petition was a nullity,”89 and “automatic stay never actually came into effect.” Courts and prominent treatises interpreted In re Casse as holding a filing in violation of the 180-day bar does not invoke the automatic stay.90 Therefore, bankruptcy judges and prominent scholars thought that, in the Second Circuit, a filing in violation of a § 109(g) dismissal order was void ab initio, precluding the automatic stay.

In spite of In re Casse, the Southern District of New York rejected the void ab initio interpretation of a filing in violation of § 109(g). In In re Flores, the debtors owned a home encumbered by a mortgage.91 After the mortgagee scheduled a foreclosure sale, the debtors filed a series of bankruptcy petitions to delay the sale.92 After the debtors filed the second petition, and the court entered an order confirming their plan, the trustee moved to dismiss the case with prejudice on the grounds that the debtors did not make payments under the plan to the trustee.93 The 87 Casse, 198 F.3d at 342 (emphasis added). 88 See supra note 63 (defining void ab initio). 89 BLACK’S LAW DICTIONARY, supra note 3, at 1095 (defining nullity as “[s]omething that is legally void”). 90 See In re Umali, 345 F.3d 818, 821 (9th Cir. 2003), where debtor filed a petition in violation of a 180 day refiling bar. In concluding that the petition did not invoke the automatic stay, the court cited In re Casse as an example of a court that treated a filing in violation of a refiling bar as void ab initio. Id. at 823. It then stated: “We likewise conclude that the district court did not err in determining that [the] filing of the . . . petition failed to trigger the automatic stay provisions of the bankruptcy code, because the . . . petition was filed in violation of the 180-day bar against refilling in effect.” Id.; see also 1 LUNDIN, supra note 59, at § 21.1 (citing In re Casse for the proposition that “several courts have held that the bankruptcy papers filed by an individual who is disabled by § 109(g) to be a debtor under any chapter do not constitute a ‘petition’ and do not give rise to an automatic stay”); 5 NORTON BANKRUPTCY LAW AND PRACTICE 2D, supra note 12, at § 118:1 (Supp. Mar. 2004) (citing In re Casse for proposition that no stay arises upon filing by ineligible debtor); 11 U.S.C. § 109(g) Interpretive Notes and Decisions VIII (70) (summarizing In re Casse as holding that a filing in violation of a refiling bar is void ab initio). 91 In re Flores, 291 B.R. 44, 47 (Bankr. S.D.N.Y. 2003). 92 Id. at 47-48. 93 Id. at 47; see BLACK’S LAW DICTIONARY, supra note 3, at 1519 (defining “trustee” as the



court dismissed the case with prejudice for 180 days under § 109(g) for failure to comply with court orders.94 After the mortgagee scheduled a foreclosure sale, the debtors filed a petition under Chapter 7,95 within the 180-day bar.96 The mortgagee proceeded with the foreclosure sale relying on the Second Circuit’s decision in In re Casse that the filing was void ab initio having been filed in violation of the 180-day bar.97 In response, the debtors filed a motion declaring the foreclosure sale in violation of the automatic stay.98

Judge Hardin held that subsequent filings in violation of a § 109(g) are not void ab initio, and that repeat filings still invoke the automatic stay.99 However, Judge Hardin ruled that the decision in In re Casse was consistent with his decision.100 He reasoned that neither the bankruptcy court nor the Court of Appeals in In re Casse held or implied that a filing in violation of § 109(g) was void ab initio; rather, the Court of Appeals recognized that the filing invoked the automatic stay.101 He pointed to specific text in the Court of Appeals’ opinion supporting this interpretation.

The text relied upon stated: “Accordingly the bankruptcy court dismissed that Chapter 13 case as void ab initio, thereby erasing the automatic stay upon which the debtor . . . relied to vacate the foreclosure.”102 According to Judge Hardin, the phrase “erasing the automatic stay” showed that an automatic stay existed, which the Court of Appeals subsequently annulled.103 He also stated that the Court of Appeals’ use of the words “dismissed that Chapter 13 case as void ab initio” referred to the fact that the Bankruptcy Court dismissed the fourth filing “nunc pro tunc104 to the date of filing for the precise purpose of retroactively abrogating the automatic stay and thereby person “elected by creditors or appointed by a judge to act as representative of a bankruptcy estate”). 94 Flores, 291 B.R. at 47. The order contained the following language: “The Chapter 13 case is hereby dismissed pursuant to . . . Section 109(g) with prejudice for 180 days from the date hereof for failure to comply with the Orders of this Court.” Id. 95 Chapter 7 of the Bankruptcy Code “is a form of relief afforded by the bankruptcy laws that involves the collection, liquidation and distribution of the nonexempt property of the debtor.” 6 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 700.01. For more information on Chapter 7, see generally, id. at ¶ 700-66; 1 GINSBERG & MARTIN, supra note 74, Part XII. 96 Flores, 291 B.R. at 47. 97 Id. at 47-8. 98 Id. at 48. 99 Id. at 46 (“As amplified below, orders entered by this Court dismissing cases with prejudice for 180 days pursuant to Section 109(g) are not intended and will not be construed to void the automatic stay in the event of a subsequent filing by the debtor within 180 days.”). 100 Id. at 57. 101 Id. at 58. 102 Id. (emphasis added). 103 Id. 104 BLACK’S LAW DICTIONARY, supra note 3, at 1097 (defining nunc pro tunc as “having retroactive legal effect through a court’s inherent power”).



validating the foreclosure sale, which would otherwise have been in violation of the automatic stay.”105 In other words, Judge Hardin claims the court in In re Casse validated the creditor’s foreclosure sale by retroactively erasing an otherwise valid stay, not by holding that no automatic stay was invoked.106 Judge Hardin did not discuss the statements mentioned in dicta in the In re Casse opinion, specifically that the “petition was a nullity” and that the “automatic stay never actually came into effect.”

Examination of the In re Casse opinion vindicates Judge Hardin’s interpretation that In re Casse retroactively erased the automatic stay. Section 362(d) provides courts with different mechanisms to grant relief from the stay, including the power to “annul.”107 Many courts interpret the word “annul” to mean that a court may grant retroactive relief from the automatic stay, thereby validating actions that would otherwise violate the stay.108 When courts retroactively erase the automatic stay, they rely on § 362(d) as authority for such an order. The court in In re Casse did invoke § 362(d), relying on established authority.109

Further, if In re Casse held that the last serial filing was null and no automatic stay came into existence, there would be no need to cite § 362(d). Section 362(a) provides that the filing of a petition operates as a stay.110 Section 362(d) provides courts with a mechanism to grant 105 Flores, 291 B.R. at 58. 106 Id. In the context of the automatic stay, a “nunc pro tunc” order lifting the stay means that although the automatic stay came into effect upon the filing of the petition, the court is now retroactively lifting the stay. See, e.g., Scrima v. John Sevries Agency, Inc., 103 B.R. 128, 135 (W.D. Mich. 1989). 107 See 11 U.S.C. § 362(d) (2000), which provides courts with the authority to grant relief from the automatic stay. It provides: “On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay.” Id. 108 See In re Albany Partners, Ltd., 749 F.2d 670, 675 (11th Cir. 1984), explaining the authority provided by § 362(d):

[Section] 362(d) expressly grants bankruptcy courts the option, in fashioning appropriate relief, of ‘annulling’ the automatic stay, in addition to merely ‘terminating’ it. The word ‘annulling’ in this provision evidently contemplates the power of bankruptcy courts to grant relief from the stay which has retroactive effect; otherwise its inclusion, next to ‘terminating’, would be superfluous.

See also In re Schwartz, 954 F.2d 569, 572 (9th Cir. 1992) (“Section 362 gives the bankruptcy court wide latitude in crafting relief from the automatic stay, including the power to grant retroactive relief from the stay.”); In re Pinetree, Ltd., 876 F.2d 34 (5th Cir. 1989); 3 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 362.07 (“The use of the word ‘annulling’ suggests that relief from the stay may operate retroactively. This would validate actions taken by a party at a time when the party was unaware of the stay.”). 109 The court cited Rowe v. Ocwen Fed. Bank & Trust (In re Rowe), 220 B.R. 591, 595 (E.D. Tex. 1997), which stated: “After finding that Rowe’s petition was filed in bad faith, the bankruptcy court used its authority under 11 U.S.C. 362(d) to lift the automatic stay ab initio. By doing so, the court validated the foreclosure sale of Rowe’s house.” In re Casse, 198 F.3d 327, 342 (2d Cir. 1999). Therefore, the court in In re Casse used § 362(d) by comparing their actions to the court’s action in In re Rowe. 110 11 U.S.C. § 362(a) (2000).



relief from the “stay provided under [362(a)].”111 Therefore, only after the stay came into existence under § 362(a), i.e. after the filing of a valid petition, would § 362(d) apply.112 If In re Casse held that the petition was void ab initio and the automatic stay under § 362(a) never came into existence, there would be nothing to grant relief from, and therefore no need to cite § 362(d).

Confusion surrounds the interpretation of the In re Casse decision. Two reasonable interpretations exist: one holding that the automatic stay is invoked upon a filing in violation of § 109(g); and, one holding that the automatic stay is not invoked upon a filing. The next section will analyze various arguments forwarded by other jurisdictions concerning whether a filing in violation of § 109(g) invokes the automatic stay.

III. ANALYSIS OF ARGUMENTS AS TO WHETHER A FILING IN VIOLATION OF § 109(g) VIOLATES THE AUTOMATIC STAY

A. The Void Ab Initio Rationale Some courts reason that the petition filed by a debtor ineligible

under § 109(g) is void ab initio, and deny the debtor the powerful benefits of the automatic stay. Under § 362(a), the filing of a “petition” invokes the automatic stay.113 For a document to constitute a “petition,” the document’s filing must “commence a case.”114 According to § 301, a case commences under a particular chapter of the Bankruptcy Code when an entity that may be a debtor under such chapter files a petition.115 Section 109 lists who “may be a debtor” under the various

111 11 U.S.C. § 362(d). 112 This is a logical conclusion based on the structure of the automatic stay provision. If no automatic stay arises under § 362(a), a creditor will have no reason to ask for relief from a stay which doesn’t exist. See, e.g., In re Prud’homme, 161 B.R. 747, 751 (Bankr. E.D.N.Y. 1993). In Prud’homme, the creditor filed a motion for relief from the automatic stay pursuant to § 362(d). The court stated that since the debtor’s petition was filed in violation of a refiling bar, no automatic stay had ever come into existence, so there was no need to use § 362(d). 113 11 U.S.C. § 362(a). 114 This reasoning stems from the definition of “petition” as defined in the Bankruptcy Code. “Petition” is defined in the Bankruptcy Code’s definitional section to be a “petition filed under section 301, 302, 303 . . . of this title . . . commencing a case under this title.” 11 U.S.C. § 101(42). Thus, to constitute a “petition” under this definition, the document must “commenc[e] a case.” 115 See 11 U.S.C. § 301, which discusses the procedure for commencing a voluntary case under a particular chapter of the Bankruptcy Code. It provides:

A voluntary case under a chapter of this title is commenced by the filing with the bankruptcy court of a petition under such chapter by an entity that may be a debtor under such chapter. The commencement of a voluntary case under a chapter of this title constitutes an order for relief under such chapter.



chapters of the Bankruptcy Code.116 Only entities who meet the eligibility requirements of § 109 may “commence” a case. An entity that does not meet the requirements of § 109 may not be a debtor and thus cannot “commence” a case. Any document labeled “petition” filed by such an entity does not constitute a “petition” as defined by the Bankruptcy Code. The filing of that document does not constitute the filing of a “petition,” preventing the automatic stay’s invocation under § 362(a).

For example, recall the above hypothetical, where D initially filed a Chapter 13 petition and took no further actions. The court dismissed the case. When D subsequently files a second petition ninety days later, the court may characterize D as willfully disobeying court orders under the previous petition, meaning the debtor is an entity that does not meet the requirements of § 109(g)(1). Therefore, the court prevents D from commencing the case, and denies D the benefits of the automatic stay. Many courts rely on this statutory construction when holding that the Bankruptcy Code supports a finding that a debtor in violation of § 109(g) will not receive the benefit of the automatic stay.117

B. The Rationale that the Automatic Stay is Invoked

Other courts and commentators hold that filers in violation of §

109(g) still receive the benefits of the automatic stay. These courts Id. Both 11 U.S.C. § 302 and 11 U.S.C. § 303 discuss the procedure for commencing joint and involuntary cases, respectively. These sections also impose the requirement that only one “that may be a debtor” under the applicable chapter can commence a case under that chapter. See 11 U.S.C. § 302 (2003); 11 U.S.C. § 303. Thus, only one who “may be a debtor” under the chapter in which he files can “commence” a case. 116 See 11 U.S.C. § 109. The Section is entitled “Who may be a debtor,” and it contains the eligibility requirements to be a debtor under the various chapters of the Bankruptcy Code. For example, § 109(b) states that railroads, insurance companies, and banks may not be a debtor under Chapter 7. 11 U.S.C. § 109(b). Section 109(f) states that only a family farmer with regular income may be a debtor under Chapter 12. 11 U.S.C. § 109(f) (2003). A person ineligible under § 109(g) may not be a debtor under any chapter of the Bankruptcy Code. 11 U.S.C. § 109(g). 117 See, e.g., In re Hollberg, 208 B.R. 755 (Bankr. D.D.C. 1997), where a creditor objected to a § 109(g) dismissal because it was concerned that the debtor might refile and cause the automatic stay to arise anew. Using the statutory construction discussed above, the court concluded that a § 109(g) dismissal “precludes a case from being commenced regarding the debtor during the 180 days following dismissal,” and thus a petition filed by such a debtor “gives rise to no automatic stay.” Id. at 756; see also In re McKay, 268 B.R. 908, 909 (Bankr. W.D. Va. 2001), where a debtor who filed in violation of § 109(g) argued that a foreclosure sale which took place after he filed a bankruptcy petition was in violation of the automatic stay. In holding that the sale was not in violation of the automatic stay, the court followed the above line of reasoning and held that the debtor’s “ineligibility under § 109(g) precludes a valid filing of a bankruptcy petition, and hence the invocation of the automatic stay.” Id. at 912; see also 1 LUNDIN, supra note 59, at § 21.1 (“Supported by decent statutory construction, several courts have held that the bankruptcy papers filed by an individual who is disabled by § 109(g) to be a debtor under any chapter do not constitute a ‘petition’ and do not give rise to an automatic stay.”).



draw support for this conclusion by relying on statutory construction. Moreover, they criticize the void ab initio rationale as being inconsistent with other sections of the Bankruptcy Code.

1. Statutory Construction Used by Courts

Courts use the following statutory construction to support the

proposition that the filing of a petition in violation of § 109(g) invokes the automatic stay. The filing of a petition generally triggers the automatic stay.118 However, there are several exceptions to this general rule found in § 362(b). 119 A filing in violation of § 109(g) is not one of these exceptions.120 Therefore, § 362 does not require courts to look at the eligibility of a debtor under § 109 before the automatic stay comes into effect.121 Moreover, § 109(g) does not state that a filing in violation of this section precludes the automatic stay.122 Due to legislative silence, courts must determine the consequences of a debtor’s violation of § 109(g).123 A court may find that such an abusive filing deserves dismissal or imposing sanctions.124 Yet, until the court makes such a determination and enters an appropriate order, the case must be treated as a normal bankruptcy case, which includes the 118 See 11 U.S.C. § 362(a). 119 See 11 U.S.C. § 362(b) (listing actions and proceedings that are exempted from the automatic stay such as criminal proceedings against the debtor, or the establishment of an order for alimony, maintenance, or support). 120 Id. 121 See In re Flores, 291 B.R. 44, 55 (Bankr. S.D.N.Y. 2003) (“Nor is there any support in § 362 for the proposition that a filing in violation of a § 109(g) dismissal does not invoke the automatic stay. Nothing in § 362 so states. Quite the contrary, § 362(a) states unambiguously that the filing of a petition ‘operates as a stay.’”); Shaw v. Ehrlich, 294 B.R. 260, 265-66 (Bankr. W.D. Va. 2002), aff’d In re Wiencko, 2004 U.S. App. LEXIS 10174 (4th Cir. 2004):

[Section] 362(a) only requires that a ‘petition’ be filed under section 301 or 302 to invoke the automatic stay. This requirement can be understood as a simple pleadings requirement, where the Code asks the debtor when filing a petition to state whether the debtor is filing individually, under section 301, jointly, under section 302, or involuntarily, under section 303. Nowhere does the Code define ‘petition’ to require that a court take an initial look at the eligibility of a debtor under a particular chapter before the automatic stay comes into effect.

122 See Flores, 291 B.R. at 52 (“[T]he most important thing to be said about Section 109(g) is to note what it does not say. [It] does not say that a subsequent filing within 180 days is void ab initio or a legal nullity, or that the automatic stay is void in such a filing.”). 123 Id. (stating that since “the Bankruptcy Code does not articulate any consequence of a . . . filing by . . . a debtor within 180 days of a dismissal under Section 109(g) . . . Congress has left it to the court to determine the consequences of [such] a filing”). 124 Id.:

Where the debtor fails to show good cause for relief from the 180-day bar to refiling in the prior dismissal order, and . . . where the facts show a pattern of abusive conduct by the debtor, the bankruptcy court may dismiss the subsequent filing forthwith, award sanctions or grant such other and further relief as may be necessary to rectify harm to creditors or preclude further contumacious conduct by the debtor.



automatic stay. 125

2. Inconsistency of Void Ab Initio Rationale with Automatic Stay

Provision of Bankruptcy Code When two possible legal interpretations exist and one produces a

meaning incompatible with the rest of the Bankruptcy Code, that interpretation should not be used.126 Courts criticize the void ab initio rule for adding language to the automatic stay provision of the Bankruptcy Code.127 Section 362(a) lists actions that are stayed by the filing of a petition.128 Congress enumerated a series of limited exceptions to the automatic stay in § 362(b).129 The filing of a petition in violation of § 109(g) is not listed among these exceptions.130 By denying an abusive filer in violation of § 109(g) the benefit of the automatic stay, courts wrongfully append an exception to a list expressly provided by Congress in the Bankruptcy Code.131 125 Id. at 55:

[T]he Code simply does not contemplate that any filing is to be treated as a “nullity.” The Code contemplates that an unauthorized or unlawful filing commences a “case” (with all that it entails, including the automatic stay) which remains a case until dismissed by an order of the court, generally after notice and an opportunity to be heard.

126 See, e.g., United Sav. Assoc. v. Timbers of Inwood Forest Assoc., Ltd., 484 U.S. 365, 371 (1988) (“A provision that may seem ambiguous in isolation is often clarified . . . because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law.”). 127 See, e.g., Flores, 291 B.R. at 55 (criticizing the void ab initio rationale for adding language to § 362); Shaw v. Ehrlich, 294 B.R. 260, 266 (W.D. Va. 2003). 128 11 U.S.C. § 362(a) (2003). 129 See 11 U.S.C. § 362(b) (listing the actions and proceedings that are excepted from the automatic stay). 130 Id. 131 Many court decisions support this proposition. For example, in Shaw v. Ehrlich, the court stated:

This judicially manufactured exception [would] dwarf all the other exceptions expressly included in section 362(b) by Congress, as the exception would require courts to determine a debtor’s eligibility under a particular chapter before the automatic stay could come into effect. In other words, rather than looking for exceptions from an automatic stay that is already in place under 362(b), courts would examine a debtor’s eligibility to decide whether an automatic stay ever comes into existence in the first place. [This] would render the stay provided by Congress in the Bankruptcy Code dependent on the decision of bankruptcy judges, making the stay in 362 (a) anything but “automatic” upon filing.

Ehrlich, 294 B.R. at 266 n.5. Moreover, in In re Flores, the court echoed the language in Shaw: Congress provided quite specifically in Section 362 (b) an exclusive list of exceptions to the automatic stay, and a filing by one who may not be a debtor under Section 109(g), or who is barred from refiling for 180 days under a court order of dismissal, is not among them. A rule that the automatic stay is abrogated in any filing within 180 days of a dismissal . . . would conflict with the mandate that a ‘filing . . . operates as a stay’ and would engraft a further exception to those provided by Congress in Section



Second, courts attack the void ab initio rule as inconsistent with § 362(d).132 Pursuant to § 362(d), bankruptcy courts provide relief from the automatic stay by terminating, annulling, modifying or conditioning the stay.133 Under § 362(d), the creditor must “request” relief from the automatic stay, which is only granted “after notice and a hearing.”134 Based on § 362(d), if a creditor wishes to lift the automatic stay because the debtor is in violation of § 109(g), the creditor must “request” relief from the court.135 Until the creditor makes such a request, the stay remains in place.136

3. Inconsistency of the Void Ab Initio Rationale with the Conversion Statute of the Bankruptcy Code

Courts also attack the reasoning underpinning the void ab initio

rationale as inconsistent with the conversion statute of the Bankruptcy Code. Under the code, debtors ineligible under one chapter of the Bankruptcy Code, such as Chapter 13, may “convert” their case, if they are eligible under another chapter, such as Chapter 7.137 When a

362(b). Such wholesale rewriting of the statute the courts do not have the power to do.

Flores, 291 B.R. at 55; see also 40235 Wash. St. Corp. v. Lusardi, 329 F.3d 1076, 1080 (9th Cir. 2003). In Lusardi, the defendant argued that Section 549(c) of the Bankruptcy Code created another exception to the automatic stay. The court rejected this argument and held that the only exceptions to the automatic stay are those listed in § 362(b). Id. 132 See Shaw, 294 B.R. at 266 (stating that § 362(d) would “appear meaningless” with a rule that the automatic stay is not invoked when a debtor who is ineligible under § 109 files a petition). 133 11 U.S.C. § 362(d) (2000). 134 Id. 135 Id. This argument suggests that a filing in violation of § 109(g) should be treated no differently than any other situation in which the creditor wants to be relieved from the automatic stay. For example, if the creditor wishes to be relieved of the automatic stay because the debtor commenced the case in bad faith, or because the creditor is not adequately protected, or to permit litigation to be concluded in another forum, or for a variety of other reasons, the creditor must follow the procedure in § 362(d) and “request” relief from the automatic stay. In all of these situations, the automatic stay will exist until the creditor moves for relief. See 3 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 362.07 (discussing many situations in which a creditor will seek relief from the automatic stay pursuant to § 362(d)). Similarly, the reasoning suggests, when a petition is filed in violation of § 109(g), the automatic stay will exist and remain in place until the creditor comes into court and requests relief. 136 See Shaw v. Ehrlich, 294 B.R. 260, 266 (W.D. Va. 2003) (stating that when a petition is filed in violation of § 109(g), the court may provide relief from the automatic stay, but “section 362(d) suggests that the stay exists and remains in place until a creditor moves for relief”). 137 See 11 U.S.C. 1307(c) (2000)(“[T]he court may convert a case under [Chapter 13] . . . to a case under Chapter 7 . . . for cause.”). For cases holding that a Chapter 13 case may be converted to Chapter 7 where the debtor was ineligible for Chapter 13 relief, see for example Rudd v. Laughlin, 866 F.2d 1040, 1041-42 (8th Cir. 1989); In re Tatsis, 72 B.R. 908, 911-12 (Bankr. W.D.N.C. 1987); In re Bobroff, 32 B.R. 933, 936 (Bankr. E.D. Pa. 1983) (“We hold that cause under § 1307 is sufficiently broad to authorize conversion when [the debtor failed to meet the



bankruptcy judge converts a case, the conversion “does not effect a change in the date of the filing of the petition.” 138 The automatic stay dates back to the original filing,139 implying that the document the debtor originally filed constituted a petition.140 However, as stated above, under the void ab initio rule, a debtor failing to meet the eligibility requirements under § 109 (not just § 109(g)) never files a petition, preventing the debtor from receiving the automatic stay’s benefits.141

To illustrate the tension between these two sections assume debtor, D, files a petition under Chapter 13. D does not meet the requirements of this chapter, and is ineligible under § 109.142 Congress allows D to convert the Chapter 13 case to another chapter of the Bankruptcy Code under which D is eligible. D is eligible under Chapter 7, and converts. After conversion, the automatic stay dates back to the filing of the Chapter 13 case, meaning D gets the benefit of the automatic stay even though the void ab initio rule characterizes D as never filing a petition. Therefore, as courts argue, the void ab initio rule is incorrect, because under § 362(a) Congress only permits a debtor who files a petition to debt requirements of Chapter 13 under § 109(e)].”). For more information on conversion of a bankruptcy case, see 2 NORTON BANKRUPTCY LAW AND PRACTICE 2D, supra note 12, at § 33:1-16. 138 See 11 U.S.C. § 348 (describing the effect of converting a case from one chapter of the Bankruptcy Code to another).

(a) Conversion of a case from a case under one chapter of this title . . . to a case under another chapter of this title . . . constitutes an order for relief under the chapter to which the case is converted, but . . . does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief.

Id. 139 See In re State Airlines, Inc., 873 F.2d 264, 268-69 (11th Cir. 1989) (stating that “conversion does not undo everything that happened before,” and “section 348(a) expressly states that the date of the petition remains unchanged [upon conversion],” in holding that the automatic stay and relief from the automatic stay is unchanged by conversion); Johnson v. Garden State Brickface & Stucco Co., 150 B.R. 617, 619 (E.D. Pa. 1993) (“If Congress had intended a conversion to affect the automatic stay provision, it clearly could have so stated.”). 140 See In re Verdunn, 210 B.R. 621 (Bankr. M.D. Fla. 1997), where a debtor who filed under Chapter 13 but was ineligible to be a debtor under Chapter 13, sought to convert the case to Chapter 7. The court allowed the conversion, and when discussing the effect of the petition and automatic stay upon the conversion, the court stated: “When a case is converted from one under Chapter 13 to one under Chapter 7, the debtor is deemed to have filed a Chapter 7 petition as of the date the Chapter 13 case was filed.” Id. at 625. 141 See supra Part III.A (discussing the void ab initio rationale). 142 See 11 U.S.C. § 109(e), which specifies the eligibility requirements to be a debtor under Chapter 13. It provides:

Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $290,525 and noncontingent, liquidated, secured debts of less than $871,550 or an individual with regular income and such individual’s spouse, except a stockbroker or commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $290,525 and noncontingent, liquidated, secured debts of less than $871,550 may be a debtor under chapter 13 of this title.

Id.



get the benefit of the automatic stay.143

IV. ADVANTAGES TO THE VOID AB INITIO RULE The superiority of the void ab initio doctrine is apparent through

examining the legislative history and policy behind § 109(g), as well as illustrating that the void ab initio rule is not inconsistent with the other sections of the Bankruptcy Code.

A. Section 109(g)’s Legislative History Supports the Void Ab Initio Rule

Section 109(g) is ambiguous.144 If a statute is ambiguous, in order

to discern the intent of Congress, courts must interpret the statute with reference to its purpose as evidenced in its legislative history.145 An examination of § 109(g)’s legislative history reveals Congress’s 143 See 11 U.S.C. § 362(a); Shaw v. Ehrlich, 294 B.R. 260, 266 (W.D. Va. 2003), concluding that the better rule is the rule that the automatic stay is invoked upon the filing of a petition by a debtor who is ineligible under § 109 because it is consistent with the conversion statute, 11 U.S.C. § 348:

If Congress intended that the Code be read so that no case and no automatic stay arises when a petition is filed by a debtor ineligible under the chapter in which he files, it is unlikely that Congress would have allowed courts to convert a supposedly non-existent case rather than require debtors to refile under a different chapter. Even more inconsistent with such an interpretation would be Congress’s mandate in section 348(a) that the automatic stay date back to the date of the original filing rather than the date of conversion, as the automatic stay would then protect the debtor during the initial period in which the debtor was ineligible for relief.

144 See State Ins. Fund v. S. Star Foods, 144 F.3d 712, 715 (10th Cir. 1998) (finding that a split among courts with regards to an issue is, in itself, evidence of ambiguity); Bolen v. Dengel, 340 F.3d 300, 309 (5th Cir. 2003) (stating that a statute that is silent with regards to an issue is considered ambiguous). 145 See Green v. Bock Laundry Mach. Co., 490 U.S. 504, 511 (1989) (stating that when the plain text of the statute does not resolve certain issues, the legislative history must be examined); United States v. Bacto-Unidisk, 394 U.S. 784, 799 (1969) (“[W]here the statute’s language seem[s] insufficiently precise, the ‘natural way’ to draw the line ‘is in light of the statutory purpose.’”). Courts already referred to the legislative history in interpreting another ambiguous issue from § 109(g). See Wright, supra note 50, at 111-13 (discussing how courts had to determine whether the application of § 109(g)(2) to all cases in which it arises was mandatory or discretionary). Some courts held that § 109(g)(2) was unambiguous on its face and did not permit courts to read a “good faith” test into it. Id. at 111-12. However, other courts, recognizing that the purpose of § 109(g) as evidenced by its legislative history was to curb abuses of the bankruptcy system, stated that § 109(g)(2) should not be applied in cases that lacked evidence of such abuse. Id. Thus, this Note will also examine the legislative history in order to discern whether Congress intended the automatic stay to be invoked upon a filing in violation of § 109(g).



intention is to prevent the triggering of an automatic stay for abusive filers in violation of § 109(g). The Senate Report states: “the purpose of [§ 109(g)] is to provide the court with greater authority to control abusive multiple filings . . . [by] prohibit[ing] any party from filing a petition who, within the previous six months, has had a previous petition dismissed for failure to abide by orders of the court or upon voluntary motion for dismissal.”146

Congress intended § 109(g) to give courts “greater authority to control abusive multiple filings.”147 If an abusive filing in violation of § 109(g) invokes the stay, courts do not possess “greater authority” to control this problem. In jurisdictions that hold the automatic stay is invoked upon such an abusive filing, courts use § 109(g) to dismiss the case, impose sanctions, and retroactively erase the automatic stay.148 Prior to the enactment of § 109(g), however, these same remedies were available and often used by courts when dealing with abusive filers.149 146 S. REP. 98-65, 74 (1983) [hereinafter Senate Report]. Due to the fact that § 109(g) was adopted late in the legislative process, the legislative history on it is sparse. See In re Richardson, 217 B.R. 479, 488 (Bankr. M.D. La. 1998). This Senate Report, and a statement made by Senator Hatch, infra note 147, are the only pieces of legislative history that lend insight into the purpose of § 109(g). 147 See Senate Report, supra note 146, at 74. Another piece of legislative history mentions this purpose. In a statement regarding the purpose of the Bankruptcy Amendments and Federal Judgeship Act of 1984, of which § 109(g) was a small part, Senator Hatch stated:

The number of consumer bankruptcy cases filed has risen dramatically each year since the bankruptcy code was last amended in 1978. Several witnesses before the Senate Judiciary Committee pointed to these changes in the Code as the principal cause of the increase. The 1978 amendments generally eased a debtor’s access to bankruptcy to avoid excessive indebtedness. Title II [sic] contains over 30 substantive amendments to curb abuses of the bankruptcy code and make its use truly a last resort.An example of the types of reform included in title III is the provision which addresses the subject of repetitive filings. A debtor would not be eligible for bankruptcy relief if a prior case filed by the same debtor had been dismissed within 180 days for failure to appear at a meeting of creditors or for failure to follow orders.

130 CONG. REC. S8891 (daily ed. June 29, 1984), reprinted in 1984 U.S.C.C.A.N 590, 597-98 (statements of Sen. Hatch). 148 See, e.g., In re Flores, 291 B.R. 44, 50-51 (Bankr. S.D.N.Y. 2003) (holding that the automatic stay is invoked upon a filing that is in violation of § 109(g) and discussing various remedies that the court can use to deal with such a filing). The court stated that: “[s]uch a filing may be subject to peremptory dismissal or even sanctions in a proper case,” or “[by] dismissal nunc pro tunc to the date of filing, or relief from the automatic stay nunc pro tunc to the date of a foreclosure sale.” Id. at 54, 59. 149 For a discussion of the authority of bankruptcy courts to dismiss cases that were filed in bad faith and to abuse the bankruptcy process prior to the enactment of § 109(g), see supra note 39. For a discussion of the authority of bankruptcy court’s to impose sanctions on bad faith filers prior to the enactment of § 109(g), see supra note 40. Under 11 U.S.C. § 362(d), courts have the power to “annul” the stay retroactively. See 11 U.S.C. § 362(d) (2000). Many cases hold that a court may use § 362(d) to annul the stay retroactively upon a finding that the debtor filed a petition in bad faith. See In re Albany Partners, Ltd., 749 F.2d 670, 675-76 (11th Cir. 1984); Tobar, supra note 62, at 27-29. Professor Tobar discusses a court’s use of § 362(d) to erase the automatic stay when a petition is filed in bad faith and stating the underlying policy for granting relief in these cases:

[The] requirement of good faith prevents abuse of the bankruptcy process by debtors



Therefore, with a rule that the automatic stay is invoked, § 109(g) did not grant courts greater authority after its enactment. Moreover, by recognizing that § 109(g) is meant to curb abusive filers, but failing to provide an additional remedy when one files in violation of § 109(g), courts would unjustly “grant [a] right, but in reality . . . withhold its privilege and enjoyment.”150

If an abusive debtor’s petition, however, is void ab initio, thereby denying the debtor the benefit of the automatic stay, courts are provided with “greater authority.”151 After the enactment of § 109(g), courts possessed a new weapon in their arsenal—the ability to prevent a debtor from filing a document that constitutes a petition. Since this power denies a bad faith filer the benefit of the automatic stay, this weapon also controls abusive filings.

Congress also intended § 109(g) to “prohibit”152 a serial filer from “filing a petition.”153 The word “prohibit” means to “prevent or hinder”154 and is “incompatible with discretion.”155 A court deems a petition “filed” when the debtor places the petition in custody of the court clerk.156 At the date of § 109(g)’s enactment, clerks were not

whose overriding motive is to delay creditors without benefiting them in any way or to achieve reprehensible purposes. Moreover, a good faith standard protects the jurisdictional integrity of the bankruptcy courts by rendering their powerful equitable weapons . . . available only to those debtors and creditors with “clean hands.”

Tobar, supra, at 27-29. 150 Mapp v. Ohio, 367 U.S. 643, 656 (1961). In Mapp, the Supreme Court held that the Fourth Amendment right against unreasonable searches and searches extends to the states. Id. at 655. To enforce this right, the court held that the exclusionary rule, which prohibited the introduction into evidence of material seized in violation of the Fourth Amendment also applied to the states. Id. The court found that the purpose of the exclusionary rule is to “deter—to compel respect for the [Fourth Amendment] in the only effectively available way—by removing the incentive to disregard it.” Id. (quoting Elkins v. United States 364 U.S. 206, 217 (1960)). Thus, the court held “the admission of the [Fourth Amendment to the states] could not consistently tolerate denial of its most important constitutional privilege, [the exclusionary rule].” Id. Similarly, by failing to provide any additional remedies or sanctions than what was available pre-109(g), a rule that the automatic stay is invoked will create no incentive to obey a § 109(g) order. Thus, by recognizing that § 109(g) is meant to protect creditors from abusive debtors, but allowing a debtor who files in violation of § 109(g) to utilize the automatic stay, a court will be granting a right but refusing to exercise its privilege. Only by removing the incentive to disobey a 109(g) order, i.e. by denying the filer the benefit of the automatic stay and preventing him from delaying a sale, will a court be able to effectively control abusive filings. 151 Senate Report, supra note 146, at 74. 152 See id. 153 See id. 154 BLACK’S LAW DICTIONARY, supra note 3, at 1228. 155 In re Richardson, 217 B.R. 479, 488 (Bankr. M.D. La. 1998) (interpreting the words “will prohibit” from the Senate Report and stating that these words “are incompatible with discretion of any sort”). 156 See FED. R. BANKR. P. 1002 (providing that: “[a] petition commencing a case under the Code is filed with the clerk”); In re Schleier 290 B.R. 45, 52 (Bankr. S.D.N.Y. 2002) (stating that a petition is deemed filed when clerk took it into his custody); In re Domaleczny, 142 B.R. 287, 289 (Bankr. N.D. Ill. 1992) (holding that a petition is deemed filed when it is placed in the possession of the clerk and the debtors were ready and able to pay the filing fee).



provided with a mechanism to check whether the debtor was ineligible to file a petition under § 109(g).157 Accordingly, the clerk would always accept the petition, even if the debtor was ineligible under § 109(g).158

With a rule that the automatic stay is invoked, courts dismiss and sanction abusive debtors, or annul the automatic stay.159 However, this does not “prohibit” an abusive filer from filing a petition. Since, after the enactment of § 109(g), clerks still cannot determine whether an abusive debtor is ineligible to file under § 109(g),160 nothing “prohibits” a debtor from going to the clerk and handing him the petition. The serial filer is left with the discretion of whether to file and is not prevented from filing. With a void ab initio rule, however, the serial filer no longer has discretion to file a petition. Even if the clerk accepts the submitted document, these documents will not constitute a petition and the automatic stay will not be invoked.161 Therefore, under this rule, courts fulfill Congress’s intention to prohibit abusive debtors from filing petitions.

B. Equitable Argument in Support of the Void Ab Initio Rule When dealing with an abusive filer who attempts to stall

foreclosure actions, courts must also balance the creditor’s and debtor’s competing interests when determining whether an abusive filing in violation of § 109(g) triggers the automatic stay. Consider the above hypothetical, where the debtor, D, files a petition under Chapter 13 to avoid a foreclosure action by C, a mortgage lender. D does not participate in the bankruptcy process, and the bankruptcy court dismisses the case. C resumes foreclosure proceedings, prompting D’s second filing. Suppose D fails to participate in the bankruptcy process again and the court dismisses the case but does not mention § 109(g) in the dismissal order. C recommences foreclosure proceedings, and D

157 See supra note 56 (stating clerks had no mechanism by which to check whether there was a filing bar on a debtor). But see Foreclosure Scam Task Force, supra note 26, stating that in 1995 California’s District Bankruptcy Court system implemented an automated system in which a clerk could check at the moment of filing whether the debtor had prior cases dismissed with 180-day bar orders. If a debtor’s case is dismissed for failing to file the required schedules or for failure to attend two creditor’s meetings, a 180-day bar will be inputted into the computer system, and if the debtor attempts to refile within 180 days, the computer system will notify the clerk of the bar order. Id. 158 See Nelson, supra note 23, at 340. 159 See supra note 148 and accompanying text. 160 See supra note 158 and accompanying text; 2 COLLIER ON BANKRUPTCY, supra note 12, ¶ at ¶109.08 (“The clerk must accept the subsequent petition when it is filed since it will not yet have been determined whether the debtor is ineligible under section 109(g).”). 161 See supra Part III.A (discussing the void ab initio rationale).



files once again. At this point, C will not know whether or not the bankruptcy court will characterize D’s third filing as being in violation of § 109(g).162

In a jurisdiction where the automatic stay is invoked for abusive debtors in violation of § 109(g), C will not proceed with the foreclosure sale fearing that they will be in violation of the automatic stay.163 If a court characterizes D to be in violation of § 109(g), D will successfully abuse the system by delaying the sale, preventing C from foreclosing on his property. On the other hand, if a court does not characterize D to be in violation of § 109(g), D is an eligible debtor, and the court properly granted D the benefits of the automatic stay.164

However, in a jurisdiction where the automatic stay is not invoked for abusive debtors in violation of § 109(g), C will proceed with the foreclosure sale.165 D will attempt to declare this sale void.166 If a court 162 See supra note 59 (explaining that it will often not be determined until the subsequent case whether a prior case was dismissed pursuant to § 109(g)). 163 See supra note 62 (discussing ability of court to impose sanctions on the debtor for violating the stay). Although the court may annul the automatic stay upon a finding that the debtor was ineligible, see supra notes 107, 108, 149, thereby validating the creditor’s sale, the creditor may fear that the court will “look askance at the creditor for acting in advance of receiving specific permission from the court” and will refuse to annul the stay. Thus, the creditor will often not proceed with the foreclosure sale. Case Law Update, NAT’L ASS’N. ATT’YS. GEN. BANKR. BULLETIN, Apr. 2003, at 13. 164 See In re Howard, 134 B.R. 225 (Bankr. E.D. Ky. 1991), where the debtor filed a petition within 180 days after a prior case was dismissed for failure to make payments under the plan. The creditor moved to dismiss the case on the grounds that the debtor’s failure to make payments was a “willful failure to obey an Order of the Court,” thus making the debtor ineligible under 109(g)(1). Id. at 225. The court found that the debtor’s failure to make payments was not “willful,” and he was thus eligible to be a debtor and receive the benefit of the automatic stay. Id. at 226. See also In re Pretzer, 96 B.R. 790, 791-92 (Bankr. N.D. Ohio 1989), where the debtor filed a petition within 180 days after prior case was dismissed for failure to file a disclosure statement or a plan. The creditor moved to dismiss the case on the grounds that the debtor was ineligible under § 109(g)(1). The court found that the debtor’s failure to file a disclosure statement or plan was not “willful,” and he was thus eligible under § 109(g)(1). Id. at 792. 165 The creditor will proceed with the foreclosure sale because if the court finds the debtor ineligible, that will mean that no automatic stay ever came into existence, and so the debtor will not have to worry about being held liable for sanctions for violating a valid automatic stay. See Shaw v. Ehrlich, 294 B.R. 267, 267-68 (Bankr. W.D. Va. 2003), aff’d, In re Wiencko, 2004 U.S. App. LEXIS 10174 (4th Cir. 2004) (“If the automatic stay were not in fact “automatic” upon the filing of a petition . . . creditors could claim ignorance as to the debtor’s eligibility and act to collect on their claims in hopes that the bankruptcy court would find no merit in the debtor’s petition.”); In re Flores, 291 B.R. 44, 61 (Bankr. S.D.N.Y. 2003) (“A blanket rule that a filing within 180 days of a dismissal under Section 109(g)(1) or (2) does not invoke the automatic stay . . . will be construed by . . . creditors as authorization to proceed with state law remedies notwithstanding that the debtor has filed a petition with the bankruptcy court.”). Further, creditors often place statutes of limitation on enforcing certain claims. See, e.g., Vigilant Ins. Co. of Am. v. Hous. Auth., 87 N.Y.2d 36, 44-45 (1995). When a debtor files a petition in bankruptcy, however, the automatic stay tolls the running of the statute of limitations. See 11 U.S.C. § 108(c) (2000), which extends time periods for commencing or continuing civil actions that are stayed by § 362. In a void ab initio jurisidcition, a finding by the court that the filing was in violation of § 109(g) would mean that no automatic stay ever came into existence, and consequently any statute of limitation a creditor may have had would not have been tolled.



characterizes D to be in violation of § 109(g), the court will deny D’s motion, finding that D’s document was not a valid petition, thus preventing D’s further abuse.167 If a court does not characterize D to be in violation of § 109(g), the court will grant D’s motion, holding that D’s document was a valid petition, and trigger the automatic stay. D, in such a situation, might suffer damages for violation of the automatic stay.168 Court awarded damages, however, might not fully compensate D.169

Therefore, courts holding that the automatic stay is not invoked prevent serial filers’ abuse, but might cause harm to the eligible debtor. The rule that the automatic stay is invoked delays the sale, but protects the eligible debtor. The legislative history of § 109(g) supports the former result.170 Section § 109(g) attempts to “control abusive multiple filings” by debtors.171 Although the latter rule promotes a legitimate Thus, if a creditor’s statute of limitation is going to expire before the subsequent court hears the case, then the creditor will likely proceed with enforcing its claim, out of fear that should the court find the debtor ineligible under 109(g) that would mean that the creditor’s statute of limitations will have expired. 166 See supra note 58 and accompanying text. 167 See, e.g., In re McKay, 268 B.R. 908, 912 (Bankr. W.D. Va. 2001); In re Miller, 143 B.R. 815, 820 (Bankr. W.D. Pa. 1992). 168 See, e.g., In re Flores, 291 B.R. at 61-62, (discussing the consequences that the debtor will suffer if the creditor proceeds with a foreclosure sale in violation of the automatic stay). The court stated that:

Proceeding to judgment, garnishment, foreclosure sale, eviction and other creditor remedies may have grievous consequences for not only the debtor but other creditors as well. If the bankruptcy court ultimately determines on the facts that the debtor was entitled to be a debtor under Section 109(g) despite the filing within 180 days of the prior dismissal—i.e., if it is subsequently determined that the filing was not a nullity and, therefore, there was an automatic stay—transactions consummated in violation of the automatic stay will be void or voidable. In such a case, the debtor may have suffered material damages which must either be absorbed by the debtor or recovered by the debtor from the secured creditor and others guilty of having violated the automatic stay which they believed to be a nullity under the blanket rule.

Id. at 61-62. 169 See Tobar, supra note 62, at 21 (“[T]o be eligible to recover damages, the debtor must offer clear and convincing evidence not only of the willful violation, but also of the amount of damages actually suffered.”); Shaw, 294 B.R. at 266 (concluding that a rule invoking the automatic stay is the better rule because it avoids the harsh consequences to the eligible debtor that would result when his automatic stay is violated). 170 See Senate Report, supra note 146, at 74. 171 Id.; see also 2 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 109.08 (“[Section] 109(g) . . . was enacted to prevent debtors from using repetitive filings as a method of frustrating creditor’s efforts to recover what is owed to them.”); 1 NORTON BANKRUPTCY LAW AND PRACTICE 2D, supra note 12, at § 18:14 (“Section 109(g) was added to curb the perceived abuse of bankruptcy by debtors who file successive petitions to thwart enforcement of a mortgage or other security interest.”). For example, in In re Ulmer, 19 F.3d 234, 235 (5th Cir. 1994), the court stated that:

Congress enacted section 109(g)(2) to prevent debtors from frustrating creditors’ efforts to recover funds owed them. The section denies a debtor the opportunity to invoke repeatedly the automatic stay of Title 11. Without the section, a debtor could move in and out of bankruptcy, forcing a creditor to pursue time and again the right to



goal by preventing harm to eligible debtors, it contravenes § 109(g)’s express purpose.

C. Consistency of Void Ab Initio Rationale with Automatic Stay Provision of Bankruptcy Code

Moreover, the void ab initio doctrine does not add another

exception to the automatic stay.172 Under this rule, if a debtor violates § 109(g), any documents submitted to the court will not be considered a “petition,” preventing the debtor from obtaining the benefits of the automatic stay.173 This does not append another exception to the list provided under § 362(b). The exceptions listed in § 362(b) describe eighteen actions that are not subject to an otherwise valid stay.174 Thus, before applying § 362(b), a court must question whether the automatic stay existed.175 Courts following the void ab initio rationale answer this question when holding that the filing of documents do not constitute a “petition” under the Bankruptcy Code.176 Without a valid petition, debtors do not receive the benefits of the automatic stay and § 362(b) never comes into play.

Similar reasoning refutes arguments that the void ab initio rationale is inconsistent with § 362(d).177 Section 362(d) provides courts with different mechanisms for granting relief from a valid automatic stay.178 Under the void ab initio rationale, when the debtor is

collect a debt. Id.; Miller, 143 B.R. at 820 (“The purpose of § 109(g)(1) of the Code is to prevent the reimposition of stays and controls under the Code when the prior performance of the debtor was willfully inconsistent with their responsibilities to the court.”). 172 See supra text accompanying notes 126-31 (noting that courts criticize the void ab initio rationale for adding another exception to automatic stay). 173 See supra Part III.A (discussing void ab initio rationale). 174 See 11 U.S.C. § 362(b) (2000), which lists 18 actions that are not subject to the “stay under [§ 362](a).” See also 3 COLLIER ON BANKRUPTCY, supra note 12, at ¶ 362.05 (stating that the exceptions listed in § 362(b) are “particular types of actions that would be stayed under the language of § 362(a) but that, for different policy reasons, are expressly excepted from the stay”). 175 Courts look to see whether the exceptions of § 362(b) apply only after the automatic stay has arisen under § 362(a). If § 362(a) is not invoked by the debtor, then the creditor may proceed with any action or proceeding. Therefore, since no stay exists there is no need to look at the exceptions under § 362(b). See, e.g., In re Davis, 15 B.R. 442, 443 (Bankr. D. Del. 1981) (stating that the § 362(b)(1) exception removes criminal actions “from the effect of the automatic stay”). 176 See supra text accompanying notes 113-17 (discussing the void ab initio rationale). Section 362(a) provides that the filing of a “petition . . . operates as a stay.” 11 U.S.C. § 362(a). By holding that no “peition” is filed, courts conclude that the stay under § 362(a) never arises, and therefore § 362(b) does not apply. If Courts applying the void ab initio rationale would create another exception from an otherwise valid stay, then they arguably would create a further exception to the list provided by Congress. 177 See supra text accompanying notes 132-36 (discussing the criticism of the void ab initio rationale and that it is inconsistent with § 362(d)). 178 See 11 U.S.C. § 362(d) (providing the court with mechanisms to grant relief “from the stay provided under [362](a)”).



ineligible under § 109(g), the creditor will not move for relief from the stay pursuant to § 362(d) because the automatic stay never came into existence.179 The debtor never filed a valid petition under the Bankruptcy Code.

Further, the rule determining that the automatic stay is invoked is inconsistent with other sections of the Bankruptcy Code. In holding that the “petition” filed by a debtor who is ineligible under § 109(g) invokes the automatic stay, the rule implies that the document filed by such a debtor constitutes a valid “petition.”180 Yet, the rule fails to consider the definitional section of the Bankruptcy Code,181 which defines “petition” as a document which “commenc[es] a case.”182 A debtor who is ineligible under § 109(g) can not commence a case, and thus the document he files is not a valid petition.183

D. Consistency of Void Ab Initio Rationale with Conversion Statute of Bankruptcy Code

When viewed under the following statutory construction, no

conflict exists between the void ab initio doctrine and the conversion statute under § 348. Under § 362(a), the automatic stay is invoked upon the filing of a “petition.”184 For a document to constitute a “petition,” the document’s filing must “commence” a case.185 When determining a case’s “commencement,” courts employing the void ab initio rule look at § 301, which deals with when a case commences under a particular chapter of the Bankruptcy Code.186 In determining whether the document is a valid petition, courts should determine when a case is

179 This is a logical concept based on the structure of the automatic stay provision. If the automatic stay under § 362(a) is not invoked, a creditor will have no reason to seek relief under § 362(d) from a stay which does not exist. See, e.g., In re Prud’homme, 161 B.R. 747, 750-51 (Bankr. E.D.N.Y. 1993), where a creditor filed a motion for relief from the automatic stay pursuant to § 362(d). The court stated that since the debtor’s petition was filed in violation of a refiling bar, no automatic stay had ever come into existence, and thus there was no need to use § 362(d). Id. at 751. 180 See 11 U.S.C. § 362(a) (providing that the filing of a “petition” operates as a stay). 181 See Stiftel v. Malarkey, 384 A.2d 9, 21 (Del. 1977) (“It is an accepted principle of statutory construction that, if the legislature does define the coverage of a statute by providing a definitional section, a court will be bound by that definition.”); In re Digex, Inc. Shareholders Litig., 789 A.2d 1176, 1199 (Del. Ch. 2000) (“Where a statute specifically defines an operative term in a definitional section, a court will be bound by that definition and shall not resort to another statute to interpret that term.”). 182 11 U.S.C. § 101(42). 183 See supra text accompanying notes 116-17. 184 11 U.S.C. § 362(a). 185 See supra note 114. 186 See supra Part IV.A. (discussing the statutory construction of the void ab initio rationale).



“commenced” by focusing on the commencement of a case “under this title,” i.e. under the Bankruptcy Code.187

Courts hold that a case is commenced under the Bankruptcy Code when a debtor who is “entitled to the benefits of the [code]” files a petition, without regard to which specific chapter he may be eligible under.188 If under any chapter a debtor is eligible for relief, the debtor is entitled to the benefits of the code, and a case will be considered commenced.189

187 Note how the definition of the word “petition” is defined as a petition that “commenc[es] a case under this title.” See 11 U.S.C. § 101(42) (emphasis added). The definition does not refer to commencing a case “under a Chapter.” Yet, in defining what it means to “commenc[e] a case under this title,” the void ab initio rationale looked at the commencement of a case under particular chapters of the Code. See supra text accompanying notes 113-117. To be consistent with the definition of petition, this section looks at how a case is commenced under this title, i.e., under the Bankruptcy Code. Courts use this distinction between a case filed “under the Bankruptcy Code” and a case filed “under a particular chapter of the Bankruptcy Code” in other contexts. See, for example In re Jones, 134 B.R. 274, 280 (N.D. Ill. 1991), where a debtor filed a petition under Chapter 13, but was ineligible under § 109(e) to be a debtor under such chapter. A creditor argued that since 28 U.S.C. § 1334(a) grants jurisdiction to “cases,” and the debtor could not commence a “case” under Chapter 13, there was no case in which the bankruptcy could attach jurisdiction to. In holding that the court had jurisdiction, the court stated:

We conclude that both the Code’s text and its structure reveals that Congress intended subject matter jurisdiction to attach when a case is filed under the umbrella of [the Bankruptcy Code] as opposed to when it is filed under a particular chapter within [the Bankruptcy Code]. Section 1334 addresses the district courts’ subject matter jurisdiction and confers jurisdiction over “cases under [the Bankruptcy Code].” Thus, it is evident that Congress intended the courts’ subject matter jurisdiction to attach when a petition is filed under “[the Bankruptcy Code],” rather than one of its chapters.

Id. at 281; see also In re Tatsis, 72 B.R. 908, 910 (Bankr. W.D.N.C. 1987) (going through a similar analysis); In re Verdunn, 210 B.R. 621, 624 (Bankr. M.D. Fla. 1997) (same). 188 In Jones, 134 B.R. at 281, the court explains how a case is commenced under the Bankruptcy Code:

Bankruptcy Rule 1002 provides that a case is commenced “under the Code” when a petition is filed with the clerk. This petition must substantially conform with Official Form No. 1. Paragraph three of Form No. 1 requires the petitioner to aver that he is “qualified to file this petition and is entitled to the benefits of [the Bankruptcy Code], United States Code as a voluntary debtor.” (alteration in original) (citations omitted);

Moreover, in In re Tatsis, 72 B.R. 908, 910 (Bankr. W.D.N.C. 1987), the court discusses a similar procedure to commence a case under the Bankruptcy Code:

[A] voluntary case is commenced by the filing of a petition conforming substantially to Official Form No. 1. Paragraph 3 of such form provides ‘Petitioner is qualified to file this petition and is entitled to benefits of [the Bankruptcy Code], U.S. Code as a voluntary debtor.’ The debtor then seeks relief under a specific chapter of the Code . . . A debtor qualified for relief under [the Bankruptcy Code] may, in fact not be eligible for relief under a specific chapter.

189 For example, in Tatsis, 72 B.R. at 910-11, the court held that a debtor may commence a case under the Bankruptcy Code, even though the Debtor while eligible under Chapter 7 was not eligible under Chapter 13, the chapter under which he filed. See also Verdunn, 210 B.R. at 623-24 (finding that debtor’s filing of petition under a chapter in which he was ineligible still commenced a “case under the Bankruptcy Code” because the debtor was eligible under another chapter); BLACK’S LAW DICTIONARY, supra note 3, at 538 (defining eligible as “fit and proper . . . to receive a benefit”).



Therefore, the void ab initio rule is consistent with the conversion statute under § 348. A case may not be converted to another chapter unless the debtor is eligible under that chapter.190 When a debtor converts a case due to ineligibility under a provision of § 109 other than § 109(g), the debtor is entitled to benefits under the code.191 The petition filed by such a debtor under the chapter in which he was ineligible will still constitute a “petition” because the debtor “commenced a case under the Bankruptcy Code.”192 Thus, upon conversion, the automatic stay dates back to the filing of the petition.193

However, an abusive debtor in violation of § 109(g) will not be eligible to commence a case under any chapter of the Bankruptcy Code.194 Since the abusive debtor is not eligible under any section, he will not be able to convert.195 Moreover, since a debtor who files in violation of § 109(g) is ineligible for relief under any chapter of the Bankruptcy Code, the debtor is not entitled to any benefits under the code.196 The debtor’s filed documents do not “commence” a case under the Bankruptcy Code and do not constitute a “petition.”197 Therefore, no automatic stay is invoked upon such a filing.

CONCLUSION Abusive filings pervade bankruptcy courts, frustrating the purpose

and power of the automatic stay. While Congress attempted to resolve this problem through the passage of § 109(g), they remained silent as to whether a party in violation of this sub-section is entitled to the benefits of the automatic stay upon re-filing within the 180-day bar. 190 See 11 U.S.C. § 1307(f) (2000), which specifies the requirement of converting a chapter 13 case to another chapter: “Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this title unless the debtor may be a debtor under such chapter.” Id.; see also 11 U.S.C. § 1112(f) (listing same requirement in converting a Chapter 11 case); 11 U.S.C. § 706(d) (stating the same requirement in converting a Chapter 7 case to another chapter). 191 Since the debtor is eligible under the chapter in which the case is being converted to, he will be entitled to the benefits of the code. See supra note 189 and accompanying text. 192 See supra notes 188-189 and accompanying text. 193 Under this form of statutory construction, a debtor’s filing in violation of § 109 (other than § 109(g)) constitutes a petition, and so the inconsistency between the void ab initio rule and the conversation statute no longer exists. See supra text accompanying notes 137-143 (discussing the inconsistency of the void ab initio rule with the conversion statute in permitting the automatic stay to be invoked without the debtor ever having filed a petition). 194 See 11 U.S.C. § 109(g): “Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under [the Bankruptcy Code]” (emphasis added). Thus, § 109(g) prevents an individual from being a debtor under any chapter of the Bankruptcy Code. 195 See supra text accompanying note 190. 196 See supra text accompanying notes 188-89. 197 Id.



Confusion surrounding this issue led to splits around the country. Some circuits have also split internally. In the Second Circuit, the contradictory interpretations of In re Casse draw into question the appropriate standard under § 109(g).

Courts and commentators support the invocation of the automatic stay under § 109(g) by relying on statutory construction and targeting the opposing view as inconsistent with other sections of the Code. In support of this rule, courts hold that a petition filed in violation of § 109(g) constitutes a petition thus invoking the automatic stay. However, countervailing reasons erode the holdings of these courts and commentators. Relying on statutory construction, courts suggest that § 109(g) should bar the benefits of the automatic stay to the abusive debtor. This rule provides that the document filed in violation of § 109(g) does not constitute a petition, precluding the benefit of the automatic stay. Viewed in light of legislative history, purpose, and a contextual analysis, this assertion is further strengthened. Without the need for legislation, the Bankruptcy Code, viewed contextually, provides answers to a thorny and dangerous threat to the automatic stay.

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