IN RE: LELAND S. SMITH, JR., Debtor.
STATE OF MAINE BUREAU OF REVENUE SERVICES, Appellee. LELAND S. SMITH, JR., Appellant,
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MAINE [Hon. John A. Woodcock, Jr., U.S. District Judge]
Christopher J. Keach, with whom James F. Molleur and Molleur
Law Office were on brief, for appellant.
Yen and Tara Twomey on brief for National Consumer Bankruptcy
Rights Center and National Association of Consumer Bankruptcy
Attorneys, amici curiae.
J. Crosman, Assistant Attorney General, with whom Thomas F.
Knowlton, Assistant Attorney General, was on brief, for
Lynch, Stahl, and Barron, Circuit Judges.
Bureau of Revenue Services (MRS) has a claim for a tax debt
owed by Leland Smith, a repeat Chapter 13 bankruptcy filer.
In this appeal, MRS and Smith dispute the scope of the
termination of the Bankruptcy Code's automatic stay for
repeat filers like Smith who file a second petition for
bankruptcy within a year of the dismissal of a prior
bankruptcy case. See 11 U.S.C. § 362(c)(3)(A).
filing of a petition for bankruptcy stays collection actions
against the debtor, the debtor's property, and property
of the bankruptcy estate. See id. § 362(a). Yet
§ 362(c)(3)(A) provides that "if a single or joint
case of the debtor was pending within the preceding 1-year
period but was dismissed," id. §
362(c)(3), then this automatic stay "shall terminate
with respect to the debtor on the 30th day after the
filing" of a petition for bankruptcy, id.
§ 362(c)(3)(A) (emphasis added). Before the end of the
thirty-day period, the bankruptcy court "may extend the
stay" if the debtor or a creditor shows "that the
filing of the [second] case is in good faith."
Id. § 362(c)(3)(B).
case presents an important question, one of first impression
in the courts of appeals: Does § 362(c)(3)(A) terminate
the automatic stay as to actions against property of the
bankruptcy estate? Courts have divided. Some have held that
§ 362(c)(3)(A) terminates the stay in its entirety,
allowing actions against the debtor, the debtor's
property, and property of the bankruptcy estate.
Others have held that it terminates the stay only in part,
allowing actions against the debtor and the debtor's
property to go forward, but preserving the stay as to actions
against estate property.
close question, we hold that § 362(c)(3)(A) terminates
the entire stay thirty days after the filing of a second
petition. We note that this only occurs if the procedure for
extending the stay, in which the debtor or a creditor has the
burden of demonstrating good faith, has not been successfully
holding that § 362(c)(3)(A) terminates the entire stay
is based on the provision's text, its statutory context,
and Congress's intent in enacting the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 (BAPCPA) and
§ 362(c)(3)(A). We first evaluate the parties'
textual arguments and, finding that they do not resolve the
issue, next consider the statutory context and congressional
purpose. We ultimately decide that MRS's reading is the
only one compatible with the text, seen in light of its
context and purpose.
affirm the decision of the bankruptcy court, In re
Smith, 573 B.R. 298 (Bankr. D. Me. 2017), which was also
affirmed by the district court, Smith v. Me. Bureau of
Revenue Servs., 590 B.R. 1 (D. Me. 2018).
Smith's first Chapter 13 case, filed in August 2011, was
dismissed in October 2014 when Smith failed to make the
payments required under his Chapter 13 bankruptcy
plan. Two months later, in December 2014, Smith
filed another Chapter 13 petition. This was also dismissed,
in November 2016, because Smith failed to make required
payments. A month later, on December 28, 2016, Smith filed
the Chapter 13 bankruptcy petition underlying this
appeal. Smith's last two cases, which
were both pending in the same one-year period, cause §
362(c)(3)(A) to apply.
December 2016 petition identified two priority creditors --
the Internal Revenue Service and MRS. MRS has proven that
Smith owed $51, 596.53 in state taxes, interest, and
penalties. Smith also identified numerous general unsecured
creditors with claims, including for unpaid credit card and
medical bills. In total, Smith said he owed almost $200, 000.
bankruptcy court eventually confirmed a plan in Smith's
December 2016 Chapter 13 case, under which Smith must pay the
trustee $800 per month for 60 months.
this Chapter 13 plan was being considered, Smith and MRS
disputed the scope of the automatic stay. Under § 362(a)
of the Bankruptcy Code, Smith's December 2016 petition
"operate[d] as a stay" of eight types of actions
against Smith, Smith's property, and property of the
bankruptcy estate. See 11 U.S.C. § 362(a).
Neither Smith nor another "party in interest," like
a creditor, had moved "for continuation of the automatic
stay," as allowed under § 362(c)(3)(B). As a
result, by January 27, 2017, thirty days after the filing of
his December 2016 petition, some part of the stay had
terminated under § 362(c)(3)(A), the provision we
construe in this case.
hearing in the bankruptcy court in February 2017, MRS moved
for an order under § 362(j) "confirming" the
extent to which the automatic stay had terminated.
Id. § 362(j). MRS argued that §
362(c)(3)(A) had terminated the automatic stay in full on
January 27. Smith argued in opposition that §
362(c)(3)(A) --specifically, the phrase "with respect to
the debtor" -- meant that the stay terminated on January
27 only as to actions against the debtor and the debtor's
property, not as to actions against the property of the
hearing, MRS explained that it had not yet taken any action
to collect estate property and that it sought clarification
because it "d[id]n't want to take the position that
the automatic stay is not applicable, then only to have a
lawsuit slapped on" if it later chose to do so. See
id. § 362(k)(1) (allowing "an individual
injured by any willful violation of a stay" to sue and
"recover actual damages"). MRS explained at oral
argument, for example, that it might later bring an action to
collect estate property if Smith were to default on his plan
bankruptcy court ruled that the automatic stay had terminated
in full, including as to property of the estate.
Smith, 573 B.R. at 299. As mentioned, the district
court affirmed. Smith, 590 B.R. at 19.
directly examine the bankruptcy court's decision. See
Irving Tanning Co. v. Kaplan, 876 F.3d 384, 389 (1st
Cir. 2017). There are no disputes about the facts, so we
proceed to reviewing the bankruptcy court's legal
conclusion de novo. Id.
begin with a close look at the provision's text and the
parties' textual arguments.
filing of a petition to begin a bankruptcy case under
Chapters 7, 11, or 13 "operates as a stay" of
certain actions in three categories: against the debtor, the
debtor's property, and property of the bankruptcy estate.
11 U.S.C. § 362(a). More specifically, the filing of a
(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
(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
(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 a tax liability of a
debtor that is a corporation for a taxable period the
bankruptcy court may determine or concerning the tax
liability of a debtor who is an individual for a taxable
period ending before the date of the order for relief under
Id. § 362(a).
automatic stay is a "fundamental . . . protection
provided by the bankruptcy laws." Midlantic
Nat'l Bank v. New Jersey Dep't of Envtl.
Prot., 474 U.S. 494, 503 (1986) (quoting S. Rep. No.
95-989, at 54 (1978); H.R. Rep. No. 95-595, at 340 (1977)).
It serves several goals of bankruptcy. It offers debtors
"breathing room" during the period of financial
reshuffling. Soares v. Brockton Credit Union (In
re Soares), 107 F.3d 969, 975 (1st Cir. 1997). The stay
also protects the debtor's assets from "disorderly,
piecemeal dismemberment . . . outside the bankruptcy
proceedings." Mann v. Chase Manhattan Mortg.
Corp., 316 F.3d 1, 3 (1st Cir. 2003). And it
"enabl[es] 'the bankruptcy court to centralize all
disputes concerning property of the debtor's estate so
that reorganization can proceed efficiently, unimpeded by
uncoordinated proceedings.'" SEC v. Miller,
808 F.3d 623, 630 (2d Cir. 2015) (quoting U.S. Lines v.
Am. S.S. Owners Mut. Prot. & Indem.
Ass'n (In re U.S. Lines, Inc.), 197 F.3d
631, 640 (2d Cir. 1999)); see also Sunshine Dev., Inc. v.
F.D.I.C., 33 F.3d 106, 114 (1st Cir. 1994) (same).
concerned about abuses of the automatic stay, altered the
stay's applicability to repeat-filing debtors like Smith
in BAPCPA. Before BAPCPA, the automatic stay "remain[ed]
in force" for all filers until specific judicial action
lifted or modified it, or until the end of the bankruptcy