As noted in these previous posts, I think that the Bankruptcy Reform Act of 2005 (nicknamed “BAPCPA”) is a misguided piece of legislation, a thought that Bankruptcy Judge Frank Monroe of Austin shares. Now, as the decisions on BAPCPA start rolling in, it appears that the legislation has significantly altered one of the cornerstones of American bankruptcy law — the automatic stay.
As most everyone knows, the automatic stay is the powerful injunction that goes into effect immediately upon the filing of a bankruptcy case. The stay enjoins most creditor actions against the debtor and the debtor’s assets to give the debtor some breathing room before a reorganization or liquidation ensues. In so going, the stay stops the “grab law” syndrome of creditors dismembering a debtor’s assets pursuant to state law collection remedies, and facilitates the dual policies of equitably distributing a debtor’s assets to all creditors while attempting to generate the highest value for such assets through either an orderly liquidation or reorganization.
Houston Bankruptcy Judge Marvin Isgur — who is at the forefront of early interpretation of the new bankruptcy legislation — points out in this new decision that the force of the automatic stay has been significantly altered under BAPCPA. In this particular case, Judge Isgur had previously dismissed the debtor’s bankruptcy case because the debtor had failed to obtain credit counseling in advance of the filing of the petition (another new BAPCPA-imposed requirement). Then, Judge Isgur took up the question of whether the automatic stay even went into effect at all during the period between the time of the filing of the defective bankruptcy case and the time that he declared the debtor ineligible to be a debtor under section 109(h) of BAPCPA. Judge Isgur makes a persuasive case that it does not:

[I]t is implausible to believe that Congress specifically identified people to exclude from the bankruptcy process, yet permitted those same people to benefit from bankruptcy’s most powerful protection: the automatic stay. Both logic and the statute dictate that no automatic stay arises on the filing of a petition by an ineligible person . . . [T]he relevant statutory language leaves no room for discretion.

Steve Jakubowski of the excellent Bankruptcy Litigation Blog provides more thorough analysis of the decision, which Judge Isgur certified for an immediate appeal to the Fifth Circuit Court of Appeals because of the policy implications of the decision. However, Judge Isgur’s interpretation of the language of the relevant BAPCPA-modified Code sections is straightforward and logical, so a reversal appears to be a longshot.
The bottom line — particularly in consumer bankruptcy cases, the automatic stay is simply not what it used to be.