REPORTED

IN THE COURT OF SPECIAL APPEALS

OF MARYLAND

No. 435

September Term, 2014

SONIA KOCHHAR

v.

AMAR NATH BANSAL, ET AL.

 

Eyler, Deborah S.,

Reed,

Salmon, James P.

(Retired, Specially Assigned),

JJ.

 

Opinion by Eyler, Deborah S., J.

 

 

 Filed: February 27, 2015
In the United States Bankruptcy Court for the District of Maryland, Baljit Kochhar

(“Baljit”) and her daughter Sonia Kochhar (“Sonia”) filed Chapter 13 bankruptcy petitions 

on October 2 and 5, 2012, respectively. Pursuant to 11 U.S.C. section 362(a), each

bankruptcy petition “operate[d] as a stay, applicable to all entities, of – (1) the

commencement . . . of a judicial . . . action or proceeding against the debtor that was or

could have been commenced before the commencement of the [bankruptcy case].” The

section 362(a) stay often is referred to as the automatic stay in bankruptcy.

On October 9, 2012, Amar Nath Bansal; Bina Bansal, his wife; Deepak Bansal, their

son; and Shashi Jain, Bina’s sister (collectively, “the Bansal family members”), filed in the

Circuit Court for Montgomery County a “Complaint to Avoid and Recover Fraudulent

Conveyances.” The Bansal family members alleged that each of them had extended a loan

or loans to Baljit, that Baljit had defaulted on the loans, and that each of them then had

obtained judgments against her. They further alleged that Baljit, with knowledge of the

judgments against her in their favor and with the intent to avoid her obligations on those

judgments, made three conveyances of residential real property to Sonia for no consideration. 

The deeds evidencing these conveyances were attached to the complaint. The Bansal family

members asked the court to set aside the three conveyances, permit the sheriff to levy on the

properties to satisfy their judgments, order that the properties be retained to satisfy those

debts, enter judgment against Baljit and Sonia for compensatory and punitive damages in an

unspecified amount, and award attorneys’ fees. When they filed suit, the Bansal family

members did not know that Baljit and Sonia had filed bankruptcy petitions.
On October 25, 2012, Sonia and Baljit filed suggestions of bankruptcy giving the

dates of their bankruptcy filings and the case numbers. From then until December 6, 2012,

there was no activity in the circuit court case. The Bansal family members did not serve

Sonia or Baljit during this time period or take any other action in the case.

Meanwhile, by order of the bankruptcy court entered on November 19, 2012, Sonia’s

bankruptcy case was dismissed for “failure to complete required filings” and the automatic

stay was terminated as to her case. One week later, on November 26, 2012, Baljit’s

bankruptcy case was dismissed for the same reason and the automatic stay was terminated

as to her case.

On December 7, 2012, the Bansal family members filed in the circuit court a “Motion

to Set Aside Bankruptcy Stay of Proceedings.” They attached copies of the two orders of the

bankruptcy court dismissing the cases and terminating the automatic stay. The circuit court

granted the motion on December 19, 2012.1

Baljit and Sonia were served on January 4, 2013. Sonia unsuccessfully moved to

quash service.

On May 1, 2013, Sonia filed a motion to dismiss, arguing that the circuit court case

was a “nullity at the time of filing” because it was commenced in violation of the automatic

As counsel for the Bansal family members candidly acknowledged at oral argument, 1

the automatic stays were terminated in the bankruptcy court and there was no need for the

circuit court to take any action. The motion was filed simply to make the circuit court aware

that the stays had been terminated.

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stay, which had rendered the circuit court without “jurisdiction to hear matters involving

Debtor or property of Debtor.” She acknowledged that her bankruptcy case had since been

dismissed and the automatic stay had been terminated, but argued that that did not “cure the

jurisdictional defect that existed at the time of [the] filing [of the circuit court case].”

The Bansal family members filed an opposition to the motion to dismiss. They took

the position that actions taken in violation of the automatic stay are voidable, not void. They

argued that under the facts of this case -- where no action was taken in the circuit court until

after the stay was terminated -- there was no prejudice to Sonia (or Baljit) and dismissal was

not required.

On June 3, 2013, while Sonia’s motion to dismiss was pending, the court entered an

order of default against Baljit.

The circuit court held a hearing on Sonia’s motion to dismiss and on July 23, 2013,

entered an order denying it. She noted an appeal from that order, which was dismissed for

failure to file an information report, as required by Rule 8-205(g).2

On March 14, 2014, the appellees moved for an order of default against Sonia. An

order of default was entered on March 20, 2014. Sonia did not move to vacate it.

On April 21, 2014, the court held an ex parte hearing on damages. 

A period of inactivity followed the July 23, 2013 order occasioned by Baljit having 2

filed a new bankruptcy petition, which gave rise to a second automatic stay. The bankruptcy

court also dismissed that petition, terminating the stay.

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On April 23, 2014, the court entered an order finding that Baljit was indebted to each

of the Bansal family members in the amount of their judgments; that Baljit had made the

three conveyances of real property to Sonia, alleged in the complaint; that each conveyance

was made for no consideration at a time when Baljit was aware of the judgments against her;

and that all the conveyances were fraudulent as a result. The court ordered the three

conveyances “vacated and set aside,” entered judgment against Sonia and Baljit jointly and

severally for $335 in costs, and entered judgment against Sonia and Baljit jointly and

severally for $15,362.50 in attorneys’ fees.

Sonia noted a timely appeal from the judgment. She presents four questions, all of

which amount to an attack on the circuit court’s subject matter jurisdiction. For the reasons

to follow, we conclude that the circuit court lacked subject matter jurisdiction over this case. 

We shall reverse the judgment.

DISCUSSION

There is no dispute in this case that the automatic stay was in effect before suit was

filed and that the action was filed in violation of the automatic stay. There also is no dispute

that, when the Bansal family members filed suit, they did not know that Baljit and Sonia had

filed bankruptcy petitions.

The issue in this appeal is what is the consequence, if any, of the instant action having

been commenced when the automatic stay was in effect. Sonia, the appellant, contends the

filing of a bankruptcy petition “serves to deprive a state court of jurisdiction over matters that

4
are then stayed.” She maintains that, because the circuit court action was filed when the

automatic stay was in effect, it was void ab initio and had to be dismissed for lack of subject

matter jurisdiction upon the termination of the stay. 

The Bansal family members, the appellees, respond that there is a split of authority

as to whether suits commenced in violation of the automatic stay are void or merely voidable. 

They urge that, under the circumstances of this case, where there is no allegation that the

appellees willfully violated the stay by commencing the circuit court case and where no

action was taken in the circuit court once the existence of the bankruptcy petitions became

known and until the bankruptcy stay was terminated, equitable considerations support the

circuit court’s decision to deny the motion to dismiss. 

Because the Constitution vests exclusive control over the regulation of bankruptcy in

Congress, Congress has the power to “oust the jurisdiction of state courts over bankruptcy

matters by vesting exclusive jurisdiction in the federal courts.” In re Bulldog Trucking, Inc.,

147 F.3d 347, 353 (4th Cir. 1998) (citing Kalb v. Feuerstein, 308 U.S. 433, 438-39 (1940)). 

As the United States Supreme Court has explained, 

Congress, because its power over the subject of bankruptcy is plenary, may by

specific bankruptcy legislation . . . render judicial acts taken with respect to the

person or property of a debtor whom the bankruptcy law protects nullities and

vulnerable collaterally . . . . The States cannot, in the exercise of control over

local laws and practice, vest State courts with power to violate the supreme

law of the land.

Kalb, 308 U.S. at 438-39. 

5
Within the exercise of this authority, Congress enacted section 362(a), which, as stated

above, causes an automatic stay, binding on all people and entities, to take effect immediately

upon the filing of a bankruptcy petition. Gilchrist v. General Elec. Capital Corp., 262 F.3d

295, 303 (4th Cir. 2001). The automatic stay is “a bedrock policy upon which the

[Bankruptcy] Code is built and a fundamental debtor protection of the bankruptcy law.” In

re Lampkin, 116 B.R. 450, 453 (Bankr. D. Md. 1990). As the Court of Appeals has

explained, the automatic stay 

is broad in scope and is intended to give the debtor a ‘breathing spell’ from

his/her creditors, to allow time to formulate a repayment or reorganization

plan, and to prevent a chaotic and uncontrolled scramble for the debtor’s assets

in a multitude of uncoordinated proceedings in different courts, by ensuring

that all claims against the debtor, other than those exempted from the stay, will

be brought in a single forum. 

Klass v. Klass, 377 Md. 13, 22 (2003); see also Williford v. Armstrong World Indus., 715

F.2d 124, 127 (4th Cir.1983) (the automatic stay “‘gives the debtor a breathing spell from its

creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits

the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the

financial pressures that drove him into bankruptcy.’” (quoting S. Rep. No. 95-989, 95th

Cong., 2d Sess. 54-55 (1978))).

The prevailing view among the federal courts of appeal is that actions taken in

violation of the automatic stay are void ab initio. See In re Smith Corset Shops, Inc., 696

F.2d 971 (1st Cir.1982); In re 48th Street Steakhouse, Inc., 835 F.2d 427 (2d Cir.1987), cert.

denied 485 U.S. 1035 (1988); In re Ward, 837 F.2d 124 (3d Cir.1988); Smith v. First

6
American Bank, N.A., 876 F.2d 524 (6th Cir.1989); In re Taylor, 884 F.2d 478 (9th

Cir.1989). The Fourth Circuit has not spoken on this issue. In a series of cases, the United

States Bankruptcy Court for the District of Maryland has hewn to the majority view. See In

re Miller, 10 B.R. 778, 780 (Bankr. D. Md. 1981) (“An action taken in violation of the stay

is void ab initio whether it is taken with knowledge of the stay or without.”); Anglemyer v.

United States, 115 B.R. 510 (D. Md. 1990) (IRS assessment for unpaid taxes made during

the automatic stay was “null and void ab initio and has no validity for any purpose.”); In re

Lampkin, 116 B.R. at 453 (“This court will adhere to the general rule that violations of the

stay are void.”). 

Our Court of Appeals has not addressed this issue, but its decision in Klass, supra, is

instructive. There, a wife filed a complaint for limited divorce in April 1999, her husband

filed a complaint for absolute divorce in September 2000, and a merits trial was set to

commence on January 3, 2001. One week before trial, the husband filed a bankruptcy

petition. The circuit court was notified of the bankruptcy petition and the trial was

postponed. Nevertheless, the divorce case remained active. The parties attended status

conferences, a guardian ad litem appointed for the children petitioned for attorneys’ fees,

discovery requests were propounded, and a new trial date was set. On April 9, 2001, the

husband was granted a discharge by the Bankruptcy Court and the automatic stay was

terminated. The merits trial commenced less than a month later. The husband did not attend. 

7
On June 29, 2001, the circuit court entered its divorce judgment resolving issues of custody,

visitation, alimony, support, property distribution, and fees. 

The husband appealed, arguing, inter alia, that the circuit court had erred by

“continuing the divorce litigation after the filing of his bankruptcy petition” and that this

error had rendered the divorce judgment void. Id. at 18. In an unreported opinion, this Court

disagreed, and affirmed the divorce judgment.

The Court of Appeals granted a writ of certiorari and affirmed in part and reversed

in part. As a threshold matter, the Court held that it has concurrent jurisdiction with the

bankruptcy court to “determine the effect of the stay” on a case pending in a Maryland state

court. Id. at 20. It opined that a “Maryland court has, and, indeed, must have, jurisdiction

to determine, at least in the first instance, whether and how a matter properly pending before

it is affected by a § 362 stay.” Id. 

Turning to the merits of the appeal, the Court explained that the divorce case was

commenced before the stay took effect and the divorce judgment was entered after the stay

had been terminated. That did not “resolve the issue, however[, because t]he stay precludes

the ‘continuation’ of a judicial proceeding against the debtor that was commenced prior to

the filing of the petition.” Id. at 21. The Court considered whether the continuation of the

divorce case when the stay was in effect rendered the relief granted in the divorce judgment

void. It pointed out that actions to establish or modify child support or alimony are explicitly

excepted from the automatic stay, see section 362(b), and held that it would adopt the

8
prevailing view among bankruptcy courts that the automatic stay does not bar a state court

from proceeding to dissolve a marriage. See, e.g., In re Becker, 136 B.R. 113 (Bankr. D. N.J.

1992) (dissolution of a marriage may proceed during automatic stay). It thus determined that

the aspects of the divorce judgment “fixing [] alimony and child support,” awarding

attorneys’ fees to the wife and the guardian ad litem, dissolving the marriage, and

establishing custody and visitation were not subject to attack because of any prior stay

violation. Klass, 377 Md. at 24. 

The Court further held that the “remaining aspects of the judgment -- the grant of a

monetary award . . . the reduction of that award to judgment, the entry of a Qualified

Domestic Relations Order directing a lump sum distribution to [the wife] from [the

husband’s] profit sharing plan . . . and the grant to [the wife] of use and possession of a

[jointly titled vehicle]” -- were “subject to the stay.” Id. at 29. The Court observed that there

is “some debate as to whether actions taken in contravention of an automatic stay under §

362(a) are absolutely void or merely voidable,” but that the “prevailing sentiment among the

Federal courts and Bankruptcy Courts is that [such] actions . . . are void ab initio.” Id. It

explained that those courts espousing the minority view, see, e.g., Sikes v. Global Marine,

Inc., 881 F.2d 176 (5th Cir.1989) (actions taken in violation of the automatic stay merely are

voidable), reason that, because the bankruptcy court has the authority, under section 362(d)

and (f), “to annul [a] stay retroactively, thereby effectively validating actions taken in

violation of a stay,” Congress must have intended that acts taken in violation of the stay be

9
merely voidable. Klass, 377 Md. at 29-30. The Court emphasized, however, that leading

authorities suggest that “the better approach is to view the annulment option ‘as a means of

avoiding the effect of the stay, rather than as an indication that acts taken in violation are

voidable.’” Id. (quoting 3 Collier on Bankruptcy § 362.111 (15th ed. rev.2003)). 

The Court declined to “weigh in” on the debate because the stay in the case before it

had been terminated, not annulled. Id. at 30. It determined that a request for admission of

facts propounded by the wife during the stay had been an “impermissible continuation of the

proceeding” and, consequently, “deemed admissions” arising from the husband’s failure to

respond were void. Id. at 32. It followed that the trial court had erred in admitting the deemed

admissions of fact into evidence at the divorce trial. Id. at 33. On this basis, the Court

reversed “all aspects of the judgment” except the divorce, custody, visitation, alimony, child

support and fee awards. Id. 

We return to the case at bar. Unlike in Klass, where the divorce action was

commenced prior to the filing of the bankruptcy petition and therefore prior to the automatic

stay, this case was commenced when the automatic stay was in effect. Plainly, the

commencement of the action was in violation of the stay. The overwhelming majority of

state courts confronted with this scenario -- the inadvertent filing of a civil action during the

automatic stay -- have held that the action is void and with no effect. See Cohen v. Salata,

709 N.E.2d 668 (Ill. App. 1999) (malpractice action commenced during the automatic stay

void ab initio and subject to dismissal for lack of subject matter jurisdiction); Hendrix v.

10
Page, 640 N.E.2d 1081 (Ind. App. 1994) (denying petition for rehearing of decision holding

that personal injury action filed in violation of the stay was void ab initio); Raikes v.

Langford, 701 S.W.2d 142, 145 (Ky. Ct. App. 1985) (affirming dismissal of wrongful death

action for lack of jurisdiction when it was commenced during the automatic stay and

rejecting the argument that jurisdiction could be “retroactively validate[d]” once the stay was

lifted); Chen v. Dickerson, 847 N.Y.S.2d 334 (N.Y. App. Div. 2007) (nonpayment

proceeding against tenant/debtor commenced during the automatic stay was a nullity);

Lawrenson v. Global Marine, Inc., 869 S.W.2d 519 (Tex. Ct. App. 1993) (personal injury

suit commenced during the automatic stay was void and a nullity from its inception). These

courts reason that the automatic stay vests exclusive jurisdiction over the property of the

estate in the bankruptcy court and prevents the state court from acquiring subject matter

jurisdiction over an action not otherwise excepted from the stay. But see Southland Express,

Inc. v. Scrap Metal Buyers of Tampa, Inc., 895 S.W.2d 335 (Tenn. Ct. App. 1994) (action

commenced in violation of the stay voidable, not void, and equitable considerations weighed

in favor of a finding that the action should not be voided). 

In light of the prevailing view of the federal courts, as recognized by the Court of

Appeals in Klass, that an action in violation of the stay is void ab initio, and the persuasive 3

authority cited above holding that a state court lacks subject matter jurisdiction over a civil

See also Dates v. Harbor Bank of Md., 107 Md. App. 362, 370 (1995) (observing that 3

the “predominant view” is that actions taken in violation of the automatic stay are void ab

initio); Home Indem. Co. v. Killian, 94 Md. App. 205, 218 (1992) (same).

11
action commenced during the automatic stay, we conclude that this action was void ab initio. 

The appellees emphasize that once Sonia and Baljit notified the circuit court of their

bankruptcy petitions, the case was stayed and only recommenced after the automatic stay was

terminated. Absent relief from the bankruptcy court, however, the termination of the stay

could not retroactively vest subject matter jurisdiction in the circuit court when the court

lacked jurisdiction over the subject matter of the case when suit was filed. Accordingly, we 4

shall reverse the judgment.

JUDGMENT OF THE CIRCUIT COURT

F O R M O N T G O M E R Y C O U N T Y

REVERSED. COSTS TO BE PAID BY THE

APPELLEES.

Pursuant to 11 U.S.C. § 362(d), the bankruptcy court may annul a stay, which has the 4

effect of “negat[ing] its existence in its entirety[,]” see Lampkin, 116 B.R. at 453, or may

grant retroactive relief from the stay. See Stallings v. Spring Meadows Apartment Complex

Ltd. P’ship, 913 P.2d 496 (Ariz. 1996) (en banc) (personal injury action commenced during

the automatic stay not void where the plaintiffs petitioned for relief from the stay in the

bankruptcy court and it granted them relief, ordering that they could “proceed” with their

state court action). No relief of any such kind was requested or ordered by the bankruptcy

court in the bankruptcy cases that were pending before this suit was filed.

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