In Re Reynaldo Acosta: Copy and Paste Is Bad Faith

Case AnalysisDeontae Wherry

In re Acosta, No. 15-70503, 2015 WL 6690053 (Bankr. S.D. Tex. Nov. 2, 2015).

Opinion issued: Nov. 2, 2015. Westlaw Link.

Written by: Deontae Wherry, Staff Member

Debtor, the owner of a trucking company, filed a total of three petitions seeking bankruptcy relief under chapter 13.[1] In the initial petition, the debtor received an extension on the automatic stay.[2] Although the plan was confirmed, the case was dismissed because the debtor failed to pay post-petition ad valorem taxes.[3] A month after the first dismissal, the debtor filed a second petition, which invoked the automatic stay as to all creditors.[4] Similar to the first case, the court dismissed the second bankruptcy proceeding for deficiencies.[5] The debtor then filed an emergency motion to impose the automatic stay pursuant to 11 U.S.C. § 362 (c)(4) because the stay is not automatic upon the third filing.[6] One creditor objected to the imposition of the automatic stay.[7]

To determine if it should provide the debtor the automatic stay, the court analyzed the debtor’s circumstances using the Charles factors.[8] Although the court found one factor weighed towards bad faith, when viewing the factors as a whole, the court found the petition was made in good faith.[9] Continuing its analysis, the court evaluated three additional factors outside of the Charles analysis: (1) if the debtor set up automatic payments for his plan, (2) if based on § 362(c)(4)(D)(i)(III), there were substantial changes from debtor’s prior filings, and (3) if pursuant to § 362(c)(4)(D)(i), any creditors had pending motions for relief from automatic stay in the prior bankruptcy cases.[10] The first factor weighed towards bad faith because the debtor failed to include any electronic payment transfer plans within his plan proposal.[11] The court found the second factor also established bad faith because there was not a substantial change to the plan—it appeared that the debtor merely copied and pasted the Plan from the previous bankruptcy petition when there was an obvious change to his financial matters.[12] Additionally, since the ad valorem taxes, the deficiencies, and the failure to set up payments plans were not addressed in the new plan, the court found no substantial change within the third filing.[13] The court denied the debtor’s motion for automatic stay.[14]

It is important to note that when the debtor has substantial changes that will impact the Plan, the debtor should address the changes in the current bankruptcy confirmation plan.[15] Moving forward, if a debtor wants the automatic stay protection after serial filings, the debtor should not merely copy and paste information from one petition to another; instead a debtor should take the time to make changes addressing prior creditor concerns.

[1] In re Acosta, No. 15-70503, 2015 WL 6690053, at *1 (Bankr. S.D. Tex. Nov. 2, 2015).

[2] Id.

[3] Id.

[4] Id.

[5] Id. at *2.

[6] Id.

[7]In re Acosta, 2015 WL 6690053 at *2.

[8] Id. (citing In re Charles, 334 B.R. 207, 209 (Bankr. S.D. Tex. 2005)). “The factors to be considered are as follows:1) Does the creditor against whom the extension of the stay is sought agree to the stay extension? 2) Is it likely that the debtor will obtain a discharge in the pending case? 3) What is the nature of the debt held by the creditor? 4) What is the nature of the collateral held by the creditor? 5) Has the debtor made any purchases on the eve of bankruptcy? 6) What has been the debtor's conduct in the pending case? 7) What are the reasons why the debtor wants to extend the automatic stay?; and 8) Are there any unique facts or circumstances particular to the pending case?” Id. at 5. The factors are used by the serial filer to overcome the presumption that the latest Chapter 13 petition was filed in bad faith. Id.

[9] Id. at *9.

[10] Id.

[11] Id. at *10.

[12] Id.

[13] Id. For the third factor, the court found it weighed in favor of finding good faith for the debtor because no motions for relief from automatic stay were filed from the first or second bankruptcy proceeding. Id.

[14] Id.

[15] Id.