In Rem Orders in Bankruptcy

Before the 2005 bankruptcy amendments, in rem orders were a somewhat common method of thwarting serial bankruptcy filers. As one court put it:

An order granting in rem relief from stay is an appropriate remedy when a debtor or transferee of a debtor serially files bankruptcy petitions solely to invoke the automatic stay. In rem relief renders the automatic stay in any future bankruptcy cases inapplicable to the lender’s foreclosure of a particular res, regardless of who owns the property or files the case. In rem relief thus addresses circumstances when the debtor is likely to invoke the automatic stay to frustrate foreclosure efforts through repeated filings, whether by the same or different persons. Rather than barring the debtor from filing a bankruptcy case in the future, the in rem remedy directly addresses abuse of the automatic stay by prospectively eliminating it with regard to the lender’s collateral even if there are future bankruptcy cases.

In re Gonzalez-Ruiz, 341 B.R. 371, 384 (1st Cir.BAP 2006) (internal citations omitted)

A court usually issued an in rem order to ensure that a foreclosure could proceed without further interference from a debtor. The authority to issue a in rem order derived from the bankruptcy court’s general powers under Section 105 of the Code. The need to issue such orders, however, has now been addressed by the 2005 bankruptcy amendments which codified and circumscribed the circumstances under which a repeat bankruptcy filer could obtain the benefits of the stay. 11 U.S.C. 362(c).

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