In Rem Relief from Stay -- Serial Filers

What Is Section 362(d)(4)?

Section 362(d)(4) is the most powerful form of relief from stay available in the Bankruptcy Code. It provides that the court shall grant relief if the court finds that the filing of the petition was part of a scheme to delay, hinder, or defraud creditors that involved either:

1. Transfer of all or part ownership of, or other interest in, the property without the consent of the secured creditor or court approval, or
2. Multiple bankruptcy filings affecting the property.

What makes this provision uniquely powerful is that the relief is in rem -- it attaches to the property, not the debtor. This means the order survives transfers of the property and is effective against any future bankruptcy filing by any person involving that property.

The Classic Serial Filing Scheme

Section 362(d)(4) was enacted to combat a specific pattern of abuse. The classic scheme works like this:

1. The property owner faces foreclosure. A foreclosure sale is scheduled.
2. The owner files bankruptcy. The automatic stay halts the foreclosure.
3. The bankruptcy case is eventually dismissed (often for failure to file required documents, failure to pay fees, or failure to propose a feasible plan).
4. The creditor reschedules the foreclosure sale.
5. Before the sale can occur, the owner transfers the property to a relative, friend, or shell entity.
6. The new owner files a new bankruptcy case. A new automatic stay halts the foreclosure again.
7. This cycle repeats, potentially for years, while the creditor is unable to enforce its lien.

Before Section 362(d)(4) was enacted (as part of BAPCPA in 2005), creditors had limited tools to break this cycle. Each new bankruptcy filing triggered a new automatic stay, and the creditor had to file a new motion for relief each time. The in rem provision was Congress's solution.

How In Rem Relief Works

Binding on the Property

An in rem order under 362(d)(4) is effective against the property itself, not just the current owner. If the property is transferred to a new owner who files bankruptcy, the automatic stay does not protect the property. The creditor can proceed with foreclosure or other remedies without filing a new motion for relief.

Duration: Two Years

In rem relief is typically effective for a period of two years from the date of the order. During this period, no bankruptcy filing by any person will generate an automatic stay as to the covered property. After two years, normal automatic stay rules apply again.

Recording Requirement

For the in rem order to be effective against subsequent purchasers or transferees, the order must be recorded in the applicable public records -- typically the county recorder's office where the property is located. This is analogous to recording a lis pendens. If the order is not recorded, a bona fide purchaser without actual knowledge of the order might argue it is not bound by it.

What the Creditor Must Prove

To obtain in rem relief under 362(d)(4), the creditor must establish:

• A scheme to delay, hinder, or defraud -- The filing must be part of a deliberate pattern of conduct aimed at frustrating the creditor's rights. A single bankruptcy filing by a debtor with legitimate financial difficulties is not a scheme.
• Transfer of ownership OR multiple filings -- The scheme must involve one of these two elements. Unauthorized transfers followed by new filings are the most common pattern. But multiple filings by the same debtor affecting the same property can also qualify.
• Connection to the property -- The scheme must specifically involve the property for which in rem relief is sought.

Courts examine the totality of the circumstances. Relevant factors include the number and timing of filings, whether cases were dismissed for procedural failures, whether the debtor made any meaningful progress in prior cases, whether property was transferred without the creditor's knowledge, and whether the debtor has legitimate debts beyond the mortgage.

Interaction with Other Serial Filer Provisions

Section 362(d)(4) works alongside other provisions that address repeat and serial filers:

• Section 362(c)(3) -- If a debtor had one prior case dismissed within the past year, the automatic stay in the new case terminates after 30 days unless the debtor moves to extend it by demonstrating good faith.
• Section 362(c)(4) -- If a debtor had two or more prior cases dismissed within the past year, no automatic stay goes into effect at all. The debtor must affirmatively request the stay.
• Section 109(g) -- Bars a debtor from refiling for 180 days after a case is dismissed for willful failure to abide by court orders or for voluntary dismissal after a creditor sought relief from stay.
• Serial filer analysis -- The broader pattern of serial filing, including statistical analysis of repeat filing rates across jurisdictions.

These provisions work as a graduated system: 362(c)(3) imposes a 30-day sunset, 362(c)(4) eliminates the stay entirely, 109(g) bars refiling for 180 days, and 362(d)(4) provides property-specific relief for two years. Together, they provide courts with flexible tools to address varying degrees of abuse.

Defending Against an In Rem Motion

If a creditor seeks in rem relief against you, the stakes are extremely high. Your defenses include:

• No scheme exists -- Demonstrate that your filing was in good faith, not part of a pattern. Show legitimate debts, a realistic plan, and genuine financial need for bankruptcy protection.
• No unauthorized transfer -- If the creditor alleges a transfer, show that the transfer was authorized by the court, occurred before the creditor's lien attached, or was a normal arms-length transaction unrelated to any scheme.
• Changed circumstances -- Even if prior filings were problematic, show that your current situation is different. New income, new debts, a feasible plan that did not exist before.
• Legitimate purpose -- The bankruptcy serves a genuine purpose beyond delaying this one creditor. You have other debts being addressed, you are making plan payments, you are cooperating with the trustee.

Frequently Asked Questions