Bad Faith and Serial Filings: Bankruptcy Stay Restrictions | Prof. Hernandez

When a debtor files for bankruptcy, the automatic stay provides immediate protection against foreclosure, repossession, and other collection actions. However, this protection is not absolute. The Bankruptcy Code requires that every petition be filed in good faith.

When a debtor engages in serial, repetitive filings, specifically those intended to disrupt foreclosure or repossession efforts, the court often deems the filing a “bad faith” attempt to manipulate the system.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

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Key Takeaways: Good Faith Requirements and Serial Filings

• The Good Faith Requirement: The automatic stay is frequently used as a tactical delay, but multiple filings could be considered a “bad faith” filing.
• Sanctions for Serial Filers: Repeat filers may face consequences such as the automatic stay expiring after 30 days or failing to arise entirely for a third filing within a single year.
• The 6-Month Prejudice Period: When a bankruptcy case is dismissed, there is an automatic 6-month bar on refiling. A motion is required to “shorten the prejudice period.”

The Consequences of Serial Filings

The Bankruptcy Code under 11 U.S.C. §362(c)(3) and (c)(4) allows sanctions against serial filers who abuse the automatic stay. If a debtor has had a case dismissed within the preceding year, the automatic stay in a subsequent filing may automatically terminate after only 30 days unless the debtor moves for an extension and proves the new filing was made in good faith.

If a debtor files a third petition within a single year, the automatic stay may fail to arise entirely upon filing. In these scenarios, the debtor must affirmatively demonstrate a “substantial change in financial circumstances” to obtain or extend the automatic stay.

The Consequences of Dismissal and the Prejudice Period

When a bankruptcy case is dismissed, the court may impose a 180‑day bar on refiling under 11 U.S.C. § 109(g). During this prejudice period, the debtor is legally prohibited from filing another bankruptcy case, leaving them exposed to continued collection activity, including foreclosure, garnishment, and repossession.

This six‑month bar is automatic by statute and designed to prevent abuse of the bankruptcy system, particularly when the prior case was dismissed for willful failure to comply with court requirements or for misuse of the automatic stay.

However, the prejudice period can be shortened or removed under 11 U.S.C. §349(a) and 11 U.S.C. §109(g). A debtor can file a “motion to shorten the prejudice period” and provide evidence to the court that there was a “substantial change in financial circumstances” or show that the prior dismissal resulted from circumstances beyond their control.

Unless the court grants such relief through a formal order, the six‑month statutory prohibition on refiling remains fully in effect, and the debtor cannot seek bankruptcy protection during that period.

Handling Cases with Multiple Filings

A bankruptcy attorney has to draw a firm line when it comes to repeat filers. If a debtor’s first case was filed only to delay a foreclosure, a second filing can be risky depending on the facts.

As a rule, I won’t take a second case after a dismissal unless something major has changed, such as the foreclosure has been completed or the debtor has moved from the property. If not, the second filing is also likely to be for delay, regardless of what the debtor states.

The reasons for this standard are straightforward:

Reputation: Courts quickly lose patience with serial filings. If a judge starts viewing a debtor and their lawyer as engaging in bad‑faith tactics, that reputation follows the attorney into every future case.

Economic Reality: The risk of sanctions or being labeled as enabling abusive filings is far greater than any fee a serial filer might pay.

The Professor’s Conclusion

The Bankruptcy Code makes clear that the automatic stay is not a tool for repeated tactical delay. Between the stay restrictions in 11 U.S.C. §362(c) and the 180‑day refiling bar under 11 U.S.C. §109(g), this protects creditors from those acting in bad faith.

Repeat filings must be evaluated through the lens of good‑faith compliance, changed financial circumstances, and the case specifics. The consequences of misjudgment can include sanctions, loss of credibility, and long‑term damage to professional standing.

About the Consumer Bankruptcy Law Series

This article is part of a comprehensive, chapter-by-chapter academic summary designed to supplement core curriculum materials.

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Disclaimer: The academic commentary and materials featured on Bankruptcy.blog are strictly for educational and informational purposes and do not constitute formal legal advice.

This article is part of my continuing series exploring bankruptcy from my textbook, Consumer Bankruptcy Law (Routledge Publishing). This discussion is part of Chapter 2: The Structural Overview of the Bankruptcy Code.

Cited Statutory References

• 11 U.S. Code §362 – Automatic Stay.
• 11 U.S. Code §109 – Who May be a Debtor.
• 11 U.S. Code §349 – Effect of Dismissal.