Bankruptcy Court Grants In Rem Relief to Creditor, Strengthening Protections Against Serial Bankruptcy Filers

By: Michael L. Moskowitz, Esq. and Melissa A. Guseynov, Esq.

In a recent decision that reinforces creditor protections against serial bankruptcy filers, the United States Bankruptcy Court for the Eastern District of California granted in rem stay relief under Section 362(d)(4) of the Bankruptcy Code. In re Town & Country Event Center LLC, No. 25-24205 (Bankr. E.D. Cal. Oct. 10, 2025).

The case involved two related entities, both managed by the same principal, that owned commercial real estate in the Sacramento area. Together, they owed more than $19 million in secured debt on property worth far less. After prior Chapter 11 cases were converted to Chapter 7 and the properties abandoned as having little value, the principal filed new bankruptcy petitions and attempted to push through a sale to an entity he controlled. Secured creditors Qualfax, Inc. and PMF CA REIT, LLC (“Creditors”) sought relief from the automatic stay pursuant to Section 362 of the Bankruptcy Code, alleging a bad faith pattern of filings and litigation intended to stall foreclosure.

Judge Klein found that the repeat filings and insider transactions were part of a scheme to hinder and delay creditors. He noted that bankruptcy is not meant to be used as a tactical weapon to obstruct foreclosure, and that the automatic stay is not a revolving door. The court not only lifted the automatic stay under Sections 362(d)(1) and (2) of the Bankruptcy Code, but he also granted in rem relief under Section 364(d)(4). This means that the automatic stay will not apply to any new bankruptcy involving the property at issue for the next two years.

This decision is significant for lenders and secured creditors, as it confirms that courts will look beyond the surface of a single filing and consider the broader pattern of a debtor’s conduct. If there’s a history of repeat filings or insider manipulation, judges may be willing to stop future abuse. Notably, Judge Klein clarified that creditors don’t need to prove fraudulent intent; it’s sufficient to show that the filings were part of a scheme to delay or hinder their rights.

Thus, the Town & Country case serves as a timely reminder that bankruptcy courts are not powerless against serial filers. It also demonstrates that creditors can be successful in using this provision of the Bankruptcy Code as a weapon to battle bad-faith and serial bankruptcy filers.

For more information, contact Falcon Rappaport & Berkman’s Creditors' Rights & Bankruptcy Practice Group. Our attorneys counsel lenders creditors on stay relief, in rem remedies, and creditor rights in complex bankruptcies. FRB will continue to provide updates to its clients and colleagues on this issue.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.