The Seduction of Serial Filings: Leapfrog and Twister for Grown-ups!

June A. Mann Mann & Stevens, P.C.

David Aaron DeSoto Mann & Stevens, P.C.

3rd ANNUAL CONSUMER BANKRUPTCY PRACTICE CONFERENCE GALVESTON, TEXAS 2007

No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of the publisher. Plagiarism isn't just bad; it's stupid. No part of this publication is intended to constitute legal advice, and the contents herein are provided as a starting point for persons seeking to research bankruptcy related issues. Persons in need of legal advice should consult with a licensed attorney. The contents of this publication are not to be employed for any purposes which run counter to any existing laws governing the use or application of federal or state laws. The views expressed herein are solely those of the authors and not necessarily those of Mann & Stevens, P.C. Instructions on how to turn this document into a trendy Paris Hilton Prison Jumpsuit may be subliminally included in some copies. I. INTRODUCTION Why do debtors file serial bankruptcy cases? Although debtors may refile for relief for a variety of reasons, they most often file multiple bankruptcy cases: (a) out of desperation - usually to stall a foreclosure sale or other imminent creditor action, (b) because problems existed in their last bankruptcy case which they hope to fix in the new filing - the case of "we couldn't do it right, now it's time to do it over" also known as a "do-over," (c) because they have experienced a change in circumstances since their last bankruptcy filing and they believe they can reorganize through repaymentinaChapter13caseorotherwisereceiveadischargeinaChapter7case,or(d)because they believe in a theory of self-entitlement which grants them all of the benefits of the automatic stay through a series of as many bankruptcy cases as it takes to achieve the desired results. How can one distinguish between serial filers who seek merely to invoke the automatic stay and debtors who truly seek to reorganize their debts, receive their discharge and move on with life? Based, in part, upon the actual impetus for each specificfilingbyadebtorandbased,inpart,upon the indicators below, the bad can be separated from the good. The ugly, we believe, are self- authenticating.

Serial Filer • files every case on the eve of or day of a scheduled foreclosure sale or repossession • files an application to pay filing fee in installments • files neither a plan nor schedules • files pro se in the last ten cases • obtains a debtor education certificate signed by Ima Sobroke or files a motion for extension of time to obtain credit counseling • asks the bankruptcy clerk whether there is a filing fee discount if this latest case would constitute a baker's dozen • when asked why spouse has six bankruptcies, replies "we share the same interests" • conveys a percentage interest in the homestead to others in between filing bankruptcy cases, most often to minor children, other relatives, and unrelated/unknowing debtors

-1- • upgrades the flavor-of-the-month to common-law spouse so he/she/it can file a separate case • files overlapping cases because the clerk or judge in the previous bankruptcy case took too long to actually enter the dismissal order • believes that "Dismissed with Prejudice" is only a bad Jean Claude Van Damme movie

Non-Serial Filer • is represented by a competent bankruptcy attorney and timely files all required documents, including a feasible plan • files a timely motion to extend stay and attends the hearing within 30 days of the bankruptcy filing and presents credible testimony to support the imposition of the stay

II. EVOLUTION OF THE PURPOSE OF THE AUTOMATIC STAY Serial filers commence cases to stall what, in some instances, is their inevitable financial fate: foreclosure, repossession, lawsuits, garnishment, and the other side effects of credit combustion. This and the not-new-but-not-any-clearer Bankruptcy Code provisions provide an interesting reflection of the evolution of the automatic stay provisions. Without digging into the archeological remnants of how debtors were lashed over a bench when they defaulted on their debts (as opposed to the present where debtors end up in bankruptcy because they financed the bench along with a matching armoire and oversized residence through a consolidated ARM loan), it should suffice to begin with the notion that the automatic stay originated as something designed to benefit creditors. The stay provided a benefit to creditors in that it protected "creditors by preventing particular creditors from acting unilaterally in self-interest to obtain payments from a debtor to the detriment of other creditors." Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1204 (3rd Cir. 1991). See also, S. Rep. No. 989 (1978), reprinted in 1978 U.S.C.C.A.N. 5787. However, over time, the automatic stay had the added benefit of becoming an injunctive mechanism to allow debtors a moment to catch their breath and to allow for the orderly and equitable distribution of the remaining assets of the estate amongst the creditors. Sweeping quickly ahead to the development of the Homo Stoppus Abruptus, the next step in the evolutionary process saw debtors filing bankruptcy cases with the sole intent of invoking the

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