Is it a violation of the automatic stay in a second bankruptcy to file a motion to show cause and to set a hearing date in a divorce case, when the contempt hearing itself follows the dismissal of the bankruptcy case?
Not according to Drakeford v. Drakeford, Record No. 1919-06-4 (Va. Ct. App. 2007), an unpublished Virginia Court of Appeals case, where the court upheld the trial court’s finding of contempt for failing to pay a monetary award after the dismissal of husband’s second bankruptcy case.
When a debtor files a second bankruptcy case within a year of a prior pending bankruptcy case, then the automatic stay expires thirty days after the filing, unless the debtor makes a motion at a hearing within thirty days to extend the automatic stay by showing good faith, as provided under 11 U.S.C. §362(c)(3). In the Drakeford case, the husband’s first chapter 13 case, filed to avoid a rule to show cause, was dismissed for failure to comply with the relevant bankruptcy rules. Although the bankruptcy case had been pending at the time of the first show cause hearing, the divorce court judge nevertheless held the husband in contempt of court for failing to pay the first installment of a monetary award and had him jailed until he produced a certified check for the first installment in the amount of $25,000. The husband did not appeal the first finding of contempt.
Shortly before the second monetary installment became due, the husband filed a second bankruptcy case, but failed to extend the automatic stay, as described above. As a result, the automatic stay expired thirty days after the filing. While the automatic stay was still in effect, the wife had filed a second motion to show cause against the husband and the Virginia Circuit Court judge set a hearing date on her motion. At the hearing, the husband argued that the automatic stay in effect on the date the motion to show cause was filed prevented the court from enforcing the monetary award. The trial court found the husband in contempt and again incarcerated him until he paid the second monetary installment to the wife.
The Court of Appeals upheld the decision of the trial court, noting that the trial court did not take any action against the husband that would affect his property or his bankruptcy estate during the thirty day period that the automatic stay was in effect. By so holding, the Court of Appeals focused on the actual hearing date, when the stay was no longer in effect, rather than the process filed against the husband while the stay was in effect.
In Drakeford, the husband could have avoided the second contempt holding in the Virginia Circuit Court had he filed for an extension of the automatic stay in bankruptcy court and for a show cause against wife for proceeding against him in the divorce case.
You should consult with your Virginia bankruptcy or divorce lawyer concerning the applicability of the automatic stay in bankruptcy to your state court divorce proceedings.