This analysis addresses a recent ruling by the United States Bankruptcy Court for the Northern District of Mississippi in the case of In re Benjamin Douglas Morris (Case No.: 12-12886-JDW) concerning the duration of the automatic stay under 11 U.S.C. § 362(a) following the administrative closure of an individual Chapter 11 bankruptcy proceeding. The court’s decision underscores the specific termination triggers set forth in the Bankruptcy Code, even when a case is closed solely for the purpose of avoiding U.S. Trustee (UST) fees.

Factual Background and Procedural History

Benjamin Douglas Morris (the Debtor) filed a voluntary Chapter 11 petition for relief on July 13, 2012. The Internal Revenue Service (IRS) initially filed a proof of claim for estimated income tax liabilities for 2010 and 2011, totaling $78,996.07. This claim was subsequently amended to $0.00 after the liabilities were assessed.

The Debtor filed a First Amended Plan of Reorganization (the “Plan”) on July 22, 2014, proposing to pay claims over 60 months. The Confirmation Order was entered on October 20, 2014. Crucially, the Debtor did not receive a discharge upon confirmation. The Confirmation Order stipulated that discharge would only be granted upon completion of all payments under the Plan. It further provided that the case could be closed for “administrative purposes” before all payments were made in order to avoid further United States Trustee fees.

Shortly after confirmation, on October 21, 2014, the IRS assessed Trust Fund Recovery Penalties (TFRPs) pursuant to 26 U.S.C. § 6672 against Morris, as a responsible officer of Dalphis Holdings, LLC, for the tax period ending December 31, 2010, in the amount of $151,289.42.

On October 31, 2014, the Debtor filed a Motion to Close Chapter 11 Case. This motion was granted, and the bankruptcy case was closed by entry of the Final Decree/Order Closing Case on December 16, 2014.

Subsequently, on March 2, 2015, the IRS assessed additional TFRPs under 26 U.S.C. § 6672 against Morris for the tax period ending December 31, 2011, totaling $337,416.14.

Between October 2019 and June 2024, the IRS initiated several collection actions against the Debtor related to these prepetition TFRP liabilities. The Debtor later filed a Motion to Reopen Chapter 11 Case on August 27, 2024, which the Court granted on October 18, 2024.

Taxpayer’s Request for Relief

Following the reopening of the case, the Debtor filed a Motion to Enforce Automatic Stay and for Sanctions against the IRS, arguing that the collection efforts undertaken between 2019 and 2024 violated the automatic stay. The Debtor contended that although he had not yet received a discharge (because he never sought one after payments were completed), the automatic stay remained in full force and effect.

The Debtor’s core argument was that the case closure was solely for “administrative purposes,” and therefore the stay remained effective post-closure. Furthermore, the Debtor argued that the Confirmation Order and the Closing Order preserved the stay.

The parties submitted cross-motions for summary judgment, stipulating that the sole issue was whether the automatic stay under 11 U.S.C. § 362(a) remained effective after the case closure on December 16, 2014. The Debtor sought sanctions, arguing the IRS violated the stay. The IRS countered that the stay terminated upon closure.

Court’s Analysis of Statutory Law

The court began its analysis by reviewing 11 U.S.C. § 362(a), which establishes the automatic stay to generally prevent creditors from pursuing collection actions against the debtor or the property of the estate for pre-petition debts (citing Campbell v. Countrywide Home Loans, Inc., 545 F.3d 348, 355 (5th Cir. 2008)).

The court emphasized the statutory termination provisions outlined in 11 U.S.C. § 362(c)(1)-(2). Section 362(c)(2) dictates that the stay terminates “until the earliest of— (A) the time the case is closed; (B) the time the case is dismissed; or (C) . . . the time a discharge is granted or denied”. The court noted that the Debtor, while correct that he had not received a discharge, overlooked that the earliest trigger point governs termination.

The court directly addressed the Debtor’s reliance on “administrative closure”. While courts, including this one, have permitted administrative closures to help debtors avoid paying quarterly UST fees between confirmation and discharge, the term “administrative closure” is not a recognized concept within the Bankruptcy Code.

The court observed that the debtor failed to cite case law supporting the proposition that the automatic stay survives administrative closure. Conversely, the court noted that numerous authorities conclude that case closure, including administrative closing, terminates the automatic stay. Supporting case law cited includes:

In re Houlik, 481 B.R. 661, 669-70 (B.A.P. 10th Cir. 2012), finding the automatic stay terminated under § 362(c) when the case was closed for administrative purposes.
In re Mendez, 464 B.R. 63, 66 (Bankr. D. Mass. 2011).
9A Collier on Bankruptcy ¶ 3022.04 (16th ed. 2025), which states that closure terminates the automatic stay.

The court concluded that while closure alleviates the expense of UST fees, the Debtor must accept that this action concurrently triggers the termination of the automatic stay.

Regarding equitable remedies, the court acknowledged that some courts have used the power granted under section 105(a) to fashion a remedy that preserves the automatic stay during an administrative closure. However, these instances, such as In re Mendez, required an affirmative court-ordered stay extension. The Mendez court explicitly recognized that the automatic stay would have terminated under section 362(c)(2)(A) but for the additional order preserving it. No such affirmative grant was requested by the Debtor or ordered by the Court in this case.

Finally, the court dismissed the argument that the Confirmation Order or Closing Order preserved the stay. While the Closing Order retained jurisdiction over administrative matters, the court clarified that a retention of jurisdiction is not equivalent to a preservation of the automatic stay. Retention of jurisdiction confirms the court’s power to interpret and enforce the Confirmation Order (citing In re RE Palm Springs II, L.L.C., 106 F.4th 406, 413 (5th Cir. 2024)). Furthermore, Fifth Circuit precedent recognizes that bankruptcy courts retain subject matter jurisdiction to protect a debtor’s rights post-closure, but this principle has never been expanded to keep the automatic stay effective after closure (citing In re Burch, 835 F. App’x 741, 748 (5th Cir. 2021) and In re Galaz, 841 F.3d 316, 322 (5th Cir. 2016)). The court pointed out that leaving the automatic stay in effect perpetually is the purpose of the discharge injunction, which the Debtor never obtained or sought (citing In re Coho Res., Inc., 345 F.3d 338, 343-44 n.16 (5th Cir. 2003)).

Application of Law to the Facts and Conclusion

Applying the plain language of 11 U.S.C. § 362(c)(2)(A) to the stipulated facts, the court determined that the earliest trigger point for stay termination occurred on December 16, 2014, when the Debtor’s case was closed following his own motion.

The court concluded that the automatic stay terminated on December 16, 2014. Because the stay was not in effect during the period of the IRS collection activities (October 2019 through June 2024), the IRS could not be sanctioned for violating the stay.

The court thus granted in part the United States’ Motion for Summary Judgment, finding that the automatic stay terminated upon the closure of the bankruptcy case. The Debtor’s Motion for Summary Judgment was denied.

Prepared with assistance from NotebookLM.