Bad‑Faith, Post‑Auction Chapter 13 Filings Can Justify Retroactive Annulment of the Automatic Stay: Eleventh Circuit’s Clarification in Smith v. Shoma Homes

Case: Marisa Smith v. Shoma Homes at Nautica Single Family, No. 24‑12183 (11th Cir. Oct. 6, 2025) (per curiam, unpublished)

Disposition: Affirmed (annulment of the automatic stay and denial of reconsideration)

Introduction

In this unpublished, per curiam decision, the Eleventh Circuit affirmed a bankruptcy court’s retroactive annulment of the automatic stay and its denial of the debtor’s motion for reconsideration. The debtor, Marisa Chanile Smith, proceeding pro se, filed a Chapter 13 petition hours after her home had been sold at a foreclosure auction brought by Shoma Homes at Nautica Single Family, a homeowners association creditor seeking to collect several years of unpaid assessments. The bankruptcy court found the filing was in bad faith and annulled the automatic stay under 11 U.S.C. § 362(d)(1), thereby validating actions taken in violation of the stay, including the clerk’s filing of a certificate of sale later that afternoon. The district court affirmed, and Smith appealed.

The appellate issues were twofold: (1) whether the bankruptcy court clearly erred in finding Smith’s Chapter 13 filing was in bad faith and abused its discretion in annulling the automatic stay for cause; and (2) whether it abused its discretion by denying Smith’s post‑judgment motion to reconsider without extensive analysis. The Eleventh Circuit held that the record supported the bankruptcy court’s bad‑faith finding and that annulment was a permissible exercise of discretion. It also held the denial of reconsideration—based largely on arguments and evidence that could have been raised earlier—was not an abuse of discretion.

Summary of the Opinion

Standards of Review: The court reviewed legal conclusions de novo, factual findings (including bad faith) for clear error, and the annulment of the automatic stay and denial of reconsideration for abuse of discretion.
Bad‑Faith Filing: The bankruptcy court’s finding of bad faith was not clearly erroneous. Smith had filed three bankruptcy petitions in four years; the prior two were dismissed without plan confirmation. The third was filed only after other last‑minute efforts to halt the sale failed; she filed hours after the auction and failed to promptly notify the state court, leading to a certificate of sale being filed in violation of the stay. She also failed to complete pre‑filing credit counseling, missed filing deadlines for required schedules and a plan, did not appear at the § 341 meeting, and proposed a likely unconfirmable plan attempting to strip a secured lien despite equity exceeding the debt.
Annulment of the Automatic Stay: Because bad faith constitutes “cause” under § 362(d)(1), the bankruptcy court acted within its discretion to annul the stay retroactively.
Reconsideration Denied: The bankruptcy court reasonably concluded that Smith showed no manifest error, newly discovered evidence, excusable neglect, or extraordinary circumstances under Rules 59(e) or 60(b). A brief but adequate explanation sufficed.
Outcome: Orders annulling the automatic stay and denying reconsideration were affirmed.

Detailed Analysis

Procedural Posture and Standards of Review

As a “second court of review,” the Eleventh Circuit independently reviews the bankruptcy court’s decision rather than the district court’s analysis. It applies mixed standards: legal questions de novo, factual findings (such as bad faith) for clear error, and discretionary rulings—like granting relief from the automatic stay under § 362(d) or denying reconsideration—only for abuse of discretion. The court reiterated that factual findings are only clearly erroneous when the appellate court is left with the “definite and firm conviction” that a mistake has been made.

Precedents and Authorities Cited and Their Role

Law Solutions of Chicago LLC v. Corbett, 971 F.3d 1299 (11th Cir. 2020): Establishes the Eleventh Circuit’s approach as a second court of review in bankruptcy appeals, independently examining bankruptcy court decisions.
In re Brown, 742 F.3d 1309 (11th Cir. 2014): Confirms that bad faith is a factual finding reviewed for clear error and identifies factors relevant to good/bad faith in Chapter 13 (motivation, timing, frequency of filings, dealings with creditors, and efforts to circumvent pending litigation).
In re Phoenix Piccadilly, Ltd., 849 F.2d 1393 (11th Cir. 1988), and In re Dixie Broadcasting, Inc., 871 F.2d 1023 (11th Cir. 1989): Classic Eleventh Circuit authorities recognizing that petitions filed to delay or frustrate creditors’ legitimate enforcement efforts may be in bad faith; such bad faith constitutes “cause” for stay relief.
In re Natural Land Corp., 825 F.2d 296 (11th Cir. 1987): Supports considering the totality of circumstances and debtor motivations to assess bad faith.
In re Custom Contractors, LLC, 745 F.3d 1342 (11th Cir. 2014): Restates the high bar for finding clear error in factual determinations.
In re Patel, 142 F.4th 1313 (11th Cir. 2025): Clarifies that while actions taken in violation of the automatic stay are ordinarily “void and without effect,” § 362(d)(1) allows courts to annul the stay retroactively “for cause.” Also confirms abuse‑of‑discretion review for annulment orders.
In re Ellingsworth Residential Community Ass’n, Inc., 125 F.4th 1365 (11th Cir. 2025): Defines abuse of discretion (misapplication of law or reliance on clearly erroneous facts) and recognizes that trial‑level explanations need only be sufficient to permit meaningful appellate review; they need not address every argument explicitly.
Holland v. Sec’y, Fla. Dep’t of Corr., 941 F.3d 1285 (11th Cir. 2019); In re Kellogg, 197 F.3d 1116 (11th Cir. 1999): Standards for reviewing denials of reconsideration for abuse of discretion.
Michael Linet, Inc. v. Village of Wellington, 408 F.3d 757 (11th Cir. 2005); Terrell v. Sec’y, Dep’t of Veterans Affairs, 98 F.4th 1343 (11th Cir. 2024): Reiterate that Rule 59(e)/60(b) motions cannot be used to relitigate issues or present arguments/evidence that could have been presented earlier.
Toole v. Baxter Healthcare Corp., 235 F.3d 1307 (11th Cir. 2000); In re Daughtrey, 896 F.3d 1255 (11th Cir. 2018): Frame the recognized grounds for reconsideration (manifest error, newly discovered evidence, excusable neglect, and extraordinary circumstances).
Statutes and Rules:
- 11 U.S.C. § 362(d)(1): Permits relief from the automatic stay “for cause,” including by annulment (retroactive relief).
- 11 U.S.C. § 109(h): Requires pre‑filing budget and credit counseling for debtor eligibility.
- 11 U.S.C. § 521: Requires timely filing of schedules, statements, and a Chapter 13 plan.
- Fed. R. Civ. P. 59(e), 60(b), incorporated by Fed. R. Bankr. P. 9023, 9024: Govern motions to alter/amend judgments and relief from judgments.

Legal Reasoning

The court’s reasoning proceeds in three layers: the sufficiency of the bad‑faith finding, the permissibility of annulment for cause, and the propriety of denying reconsideration.

First, on bad faith, the bankruptcy court applied the Eleventh Circuit’s familiar multi‑factor, totality‑of‑the‑circumstances framework (derived from Phoenix Piccadilly, Dixie Broadcasting, Natural Land, and Brown). It considered Smith’s motivations (filing solely to halt the foreclosure after other efforts failed), the timing (filed hours after the auction), the serial nature of filings (three petitions in four years with prior dismissals), post‑filing compliance (failure to complete pre‑filing counseling, missed deadlines for schedules and plan, failure to attend the § 341 meeting, late plan payments), and the proposed plan’s likely unconfirmability (attempting to strip the HOA lien despite equity exceeding the debt and paying only ongoing assessments without curing the arrearage resolved by the foreclosure judgment and sale). These facts provided ample evidence that Smith’s filing was aimed at delaying or frustrating a secured creditor’s legitimate enforcement efforts—textbook bad faith under the circuit’s precedent.

Second, having found bad faith, the court held there was “cause” under § 362(d)(1) to grant relief from the automatic stay by annulment. The Eleventh Circuit reaffirmed that stay violations are ordinarily “void and without effect,” but § 362(d)(1) authorizes retroactive relief to validate acts taken in violation of the stay when cause exists—here, the debtor’s bad faith. That annulment remedied the post‑petition filing of the certificate of sale and ensured the integrity of the foreclosure process that had culminated before the bankruptcy filing.

Third, the court affirmed the denial of reconsideration. Under Rules 59(e) and 60(b), reconsideration is an extraordinary remedy, not a vehicle to rehash arguments or inject evidence that could have been presented earlier. Smith’s motion largely repeated her opposition to stay relief (attacking the foreclosure’s fairness, attributing issues to attorney negligence, and appealing to her equity in the property). She did not identify a manifest error of law or fact, newly discovered evidence, excusable neglect, or extraordinary circumstances. The bankruptcy court’s brief explanation indicated it applied the correct legal standards and considered the arguments; that sufficed for appellate review, satisfying Ellingsworth.

Application to the Facts

Serial filings and timing: Third filing in four years; filed hours after an auction (and only after other attempts to halt the sale failed). These facts strongly supported an inference of tactical, not rehabilitative, use of Chapter 13.
Noncompliance and futility: No pre‑filing counseling (§ 109(h)), late/missing schedules and plan (§ 521), failure to attend the § 341 meeting, and late payments—all signaling a case headed for dismissal and undermining claims of a sincere reorganization effort.
Plan defects: The plan attempted to strip the HOA’s lien even though the debtor had equity exceeding the debt, and it proposed paying only current assessments, not curing the accrued arrearage addressed by the foreclosure judgment—rendering the plan likely unconfirmable.
Effect on foreclosure proceedings: Because Smith did not promptly notify the state court, the clerk filed a certificate of sale after the petition—an act ordinarily void under the automatic stay. The bankruptcy court’s annulment retroactively validated that filing.

Impact and Implications

Although unpublished and therefore non‑binding in the Eleventh Circuit, this decision has meaningful persuasive value and practical significance:

Clarifies the availability of retroactive relief when bad faith is clear: Creditors—including HOAs and mortgagees—may rely on this decision to seek annulment where a debtor files post‑auction (or otherwise at the eleventh hour) solely to stall enforcement and then fails to meet fundamental eligibility and compliance requirements.
Reinforces totality‑of‑the‑circumstances bad‑faith analysis in Chapter 13: Factors like serial filings, timing relative to state‑court enforcement, compliance failures, and plan feasibility can collectively establish cause for extraordinary relief such as annulment.
Signals that equity alone does not overcome bad faith: A debtor’s equity position does not immunize a last‑minute, non‑compliant Chapter 13 filing from a bad‑faith finding and retroactive stay relief.
Sets expectations for reconsideration practice: Bankruptcy courts need not write extensive opinions to deny reconsideration if the record shows that the correct standards were applied and there is a clear lack of new grounds. Litigants cannot use reconsideration to revisit arguments or present previously available evidence.
Stability in foreclosure processes: By validating retroactively the ministerial acts taken shortly after a bad‑faith filing, courts protect the integrity and finality of foreclosure sales, deterring tactical filings aimed at sowing post‑sale uncertainty.

Complex Concepts Simplified

Automatic stay (11 U.S.C. § 362): An immediate injunction that halts most collection and enforcement actions upon filing a bankruptcy petition.
Annulment vs. termination/modification of the stay: “Terminate” or “modify” governs future conduct; “annul” is retroactive, validating actions that occurred during the stay and that would otherwise be void.
“Void” stay violations in the Eleventh Circuit: Acts taken in violation of the stay are ordinarily void ab initio, but a court may retroactively validate them by annulling the stay for cause.
“Cause” under § 362(d)(1): A flexible standard. Bad‑faith filing is a well‑recognized form of cause sufficient for stay relief, including annulment.
Bad‑faith factors in Chapter 13: Courts consider the debtor’s motives, timing relative to creditor enforcement, serial filings, compliance with bankruptcy duties, dealings with creditors, and whether the petition was a tactic to sidestep pending litigation.
Pre‑filing credit counseling (§ 109(h)): A statutory prerequisite. Without it (absent narrow exceptions), a debtor is not eligible, and dismissal is likely.
Debtor’s initial duties (§ 521): Filing complete schedules, a statement of financial affairs, and a feasible plan on time; attending the § 341 meeting; and making timely pre‑confirmation payments.
Reconsideration (Rules 59(e), 60(b)): Extraordinary remedies to correct manifest errors, address newly discovered evidence, or account for excusable neglect/extraordinary circumstances. They cannot be used to reargue the case or offer evidence/arguments available earlier.

Conclusion

The Eleventh Circuit’s unpublished decision in Smith v. Shoma Homes at Nautica Single Family reinforces a consistent theme in the circuit’s bankruptcy jurisprudence: a Chapter 13 petition filed in bad faith—especially a serial, last‑minute filing designed to thwart legitimate creditor remedies and marked by basic eligibility and compliance failures—warrants robust relief, including retroactive annulment of the automatic stay. The court’s application of long‑standing factors from Phoenix Piccadilly, Dixie Broadcasting, Natural Land, and Brown, together with its reliance on recent guidance in Patel and Ellingsworth, confirms that annulment is an appropriate and flexible tool to protect the integrity of state‑law enforcement actions in the face of abuse. On reconsideration, the decision underscores that concise, standards‑focused orders are sufficient, and that post‑judgment motions cannot substitute for arguments and evidence that should have been presented earlier.

While not precedential, the opinion provides a clear roadmap for litigants and courts confronting post‑auction bankruptcy filings: where the totality of circumstances evidences a tactical, non‑compliant, and ultimately futile use of Chapter 13, bankruptcy courts may—and the Eleventh Circuit will—uphold retroactive annulment of the stay to validate otherwise void acts and to prevent misuse of the bankruptcy process.