Source: https://fightforeclosure.net/tag/federal-court/
Timestamp: 2019-07-16 05:00:44
Document Index: 268340580

Matched Legal Cases: ['§ 362', '§ 362', '§ 1107', '§ 362', '§ 542', '§ 541', '§ 362', '§ 101', '§ 362', '§ 362', '§ 362', '§ 362', '§ 105', '§ 362', '§ 362', '§ 362', '§362', '§546', '§546', '§ 362', '§ 362', '§ 362', '§ 362', '§ 362']

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What Homeowners Need to Know About Bankruptcy Automatic Stay
Posted by BNG in Bankruptcy, Federal Court, Foreclosure Defense, Litigation Strategies, Non-Judicial States, Pro Se Litigation, Your Legal Rights
automatic stay, Bankruptcy, bankruptcy court, chapter 13 bankruptcy, Federal Court, Foreclosure, homeowners, Pro se legal representation in the United States
statutory stay of litigation and lien enforcement, effective automatically on the commencement of a bankruptcy case. 11 U.S.C. § 362(a) (“. . . a petition [commencing a case] . . . operates as a stay, applicable to all entities . . .”.)
Maritime Electric Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir. 1991) (“automatic stay allows debtor breathing spell from creditors and stops collection efforts”); In re Peregrine Systems, Inc., 314 B.R. 31, 44 (Bankr. D. Del. 2004) aff’d in part, rev’d in part on other grounds, 2005 WL 2401955 (D. Del. Sept. 29, 2005) (automatic stay is a “fundamental protection provided to a debtor for the purpose of stopping all creditor collection efforts and harassment of the debtor and to provide … a fresh start.”); Shaw v. Ehrlich, 294 B.R. 260, 267 (W.D. Va. 2003), aff’d, 99 Fed. Appx. 466 (4th Cir. 2004) (“stay protects debtors, as well as creditors, by providing debtors a breathing spell from collection
efforts”).
policy rationale: “to grant complete, immediate, albeit temporary relief to the debtor from creditors, and also to prevent dissipation of the debtor’s assets before orderly distribution to creditors can be effected.” S.E.C. v. Brennan, 230 F.3d 65, 70 (2d Cir. 2000) (quoting Penn Terra Ltd. v. Department of Envtl. Resources, 733 F.2d 267, 271 (3d Cir. 1984)). See also Reliant Energy Services, Inc. v. Enron Canada Corp., 349 F.3d 816, 825 (5th Cir. 2003) (“purposes of the bankruptcy stay under 11 U.S.C. § 362 ‘are to protect the debtor’s assets, provide temporary relief from creditors, and further equity of distribution among the creditors by forestalling a race to the courthouse.'”) (quoting GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711, 716 (5th Cir. 1985)); Mann v. Chase
Manhattan Mortgage Corp., 316 F.3d 1, 3 (1st Cir. 2003) (“automatic stay
provision is designed to forfend against the disorderly, piecemeal dismemberment of the debtor’s estate outside the bankruptcy proceedings”).
1 Code § 1107(a) gives a chapter 11 debtor-in-possession the “rights,” “duties” and “powers” of a trustee. See NLRB v. Bildisco & Bildisco, 465 U.S. 513, 517 n. 2 (1984). See also Fed. R. Bankr. P. 9001(10) (“‘Trustee’ includes a debtor in possession in a Chapter 11 case.”).
1. The stay is automatic upon filing of the petition commencing a case under Code chapters 7 (liquidation), 9 (municipal debt adjustment), 11 (reorganization), 13 (individual debt adjustment), or chapter 15 (cross-border cases) with respect to foreign main proceedings. See e.g. Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 (9th Cir. 2002) (“the automatic stay requires an immediate freeze of the status quo by precluding and nullifying post-petition actions”); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994) (“[a]utomatic stay is effective immediately upon filing of bankruptcy petition”) (citing Shimer v. Fugazy (In re Fugazy Express, Inc., 982 F.2d 769, 776 (2d Cir. 1992));
bankruptcy case, and generally cannot be waived by the debtor. Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991) (held, because automatic stay serves interests of both debtors and creditors, it may not be waived and its scope may not be limited by debtor); In re Atrium High Point Ltd. Partnership, 189 B.R. 599 (Bankr. M.D.N.C. 1995) (before enforcing a debtor’s prepetition waiver of automatic stay bankruptcy court must look at circumstances under which prepetition waiver arose); but see In re Excelsior Henderson Motorcycle Mfg. Co., Inc., 273 B.R. 920 (Bankr. S.D. Fla. 2002) (court enforced prepetition agreement under which chapter 11 debtor waived automatic stay).
2. The broad jurisdictional base of Section 362 confirms the court’s inherent
power to protect property within its jurisdiction and to prevent any divestiture of that jurisdiction. Isaacs v. Hobbs Tie & Timber Co., 51 S. Ct. 270, 282 (1931) (held, jurisdiction of bankruptcy court respecting property of debtor’s estate having attached, actions brought in other courts could not affect it). See In re Mohawk Greenfield Motel Corp., 239 B.R. 15 (Bankr. D. Mass. 1999) (“the automatic stay protects the bankruptcy court’s exclusive jurisdiction over the debtor and its property”) (citing In re Soares, 107 F.3d 969, 975 (1st Cir. Mass. 1997)).
969 (1st Cir. 1997)) (post-petition state court default order signed by judge two weeks after bankruptcy filing violated automatic stay);
notice of termination on assignee of restaurant lease rather than on debtor, which still had interest in the property, violated automatic stay); and e. an IRS sale of property seized prior to commencement of case. 11 U.S.C. § 362(a)(8); United States v. Whiting Pools, Inc., 462 U.S. 198 (1983) (IRS may also be compelled to turn over levied property under Code § 542).
limited to protecting property belonging to a debtor. Property of the estate is defined in Code § 541(a)(1) (“. . . all legal or equitable interests of the debtor in property as of the commencement of the case.”). See In re Lankford, 305 B.R. 297, 301 (Bankr. N.D. Iowa 2004) (“All recognizable interests of the debtors or the estate are afforded the protection of § 362(a)…This includes a mere possessory interest in real property without any accompanying legal interest.”).
See also In re Moffett, 356 F.3d 518 (4th Cir. 2004) (held, chapter 13 debtor’s statutory right of redemption was sufficient interest in automobile that was repossessed prepetition to be included in estate property). But see In re Jasper, 325 B.R. 50, 55 (Bankr. D. Me. 2005) (credit union’s policy of revoking membership benefits of members who caused credit union a loss does not violate automatic stay); In re Santangelo, 325 B.R. 874 (Bankr. M.D. Fla. March 22, 2005) (district court did not violate automatic stay by approving class action settlement for claims against mortgage lender; rather, court gave prospective class members, including debtor choice of remaining class members or opting out of class); In re Medex Regional Laboratories, LLC, 314 B.R. 716 (Bankr. E.D. Tenn. 2004) (proceeds of debtor’s directors’ and officers’ liability insurance policies were not property of estate and were not protected by automatic stay, even though policies also provided coverage to debtor for indemnification claims, because the debtor had not provided any indemnification to non-debtor insiders and such indemnification claims were merely hypothetical). Compare In re Arter & Hadden, L.L.P., 335 B.R. 666 (Bankr. N.D. Ohio 2005) (proceeds of debtor’s directors’ and officers’ liability insurance policies are property of estate because policies also provided coverage to debtor and there was no reason why direct suit against debtor is either practically or procedurally untenable).
(ii) Abandonment. Abandonment terminates the stay as to abandoned property. In re Holly’s, Inc., 140 B.R. 643 (Bankr. W.D. Mich. 1992) (once abandonment of debtor’s property is effectuated, or foreclosure of real and personal property is completed, taxing entity is entitled to enforce its statutory in rem rights against property.). But see In re Thompson-Mendez, 321 B.R. 814, 819 (Bankr. D. Md. 2005) (trustee’s deemed rejection of debtor’s residential lease by failure to timely assume it did constitute abandonment such that lease was no longer protected by
automatic stay).
including any “person, estate, trust, governmental unit.” 11 U.S.C. § 101(15).
This broad definition of “entity” eliminates the need to define who is a “creditor,” “secured creditor” or other person affected by the stay.
B. Duration of the Stay. Unless the court orders otherwise (i.e., unless creditor gets automatic stay modified), the stay “continues until such property is no longer property of the estate.” 11 U.S.C. § 362(c)(1). The stay of all other acts continues until case is closed or dismissed, or, if debtor is an individual, until debtor is granted or denied a discharge. 11 U.S.C. §§ 362(c)(2)(A), (B) and (C). See also In re Allen, 300 F.3d 1055, 1059 (9th Cir. 2002) (automatic stay “prohibits action against the bankruptcy estate only until the bankruptcy court confirms a plan reorganizing the debtor’s property”); Middle Tennessee News Co., Inc. v. Charnel of Cincinnati, Inc., 250 F.3d 1077 (7th Cir. 2001) (automatic stay remains in effect until bankruptcy court disposes of case or grants relief from stay); In re Spirtos, 221 F.3d 1079, 1081 (9th Cir. 2000) (“So long as there are assets in the estate, then, the stay remains in effect”); Eastern Refractories Co. Inc. v. Forty Eight Insulations Inc., 157 F.3d 169 (2d Cir. 1998) (order “terminating” automatic stay operates from date of order’s entry); Lomagno v. Salomon Brothers Realty Corp., 320 B.R. 473, 481 (B.A.P. 1st Cir. 2005), aff’d, 429 F.3d 16 (1st Cir. 2005) (automatic stay not retroactively imposed when dismissal order set aside on due process grounds); In re Peregrine Systems, Inc., 314 B.R. 31, 44 (Bankr. D. Del. 2004), aff’d in part, rev’d in part on other grounds, 2005 WL 2401955 (D. Del. Sept. 29, 2005) (automatic stay “continues until the bankruptcy case is closed, dismissed, or discharge is granted or denied, or until the bankruptcy court grants some relief from the stay.”) (citing Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.3d 1194, 1206 (3d Cir. 1991)); U.S. v. White, 466 F.3d 1241 (11th Cir. 2006) (debtor discharged and automatic stay terminates on date of confirmation of debtor’s reorganization plan even when plan contains a later effective date). If a case is filed by or against a debtor who is an individual and a case of the debtor was pending within the preceding one year period but was dismissed, the automatic stay “with respect to any action taken with respect to a debt or property
securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case.”
11 U.S.C. § 362(c)(3)(A). See Jumpp v. Chase Home Finance, LLC (In re Jumpp), 356 B.R. 789 (B.A.P. 1st Cir. 2006) (interpreting § 362(c)(3)(A) automatic stay terminates only in regard to debtor; stay continues, though, in regard to property of estate).
• As of October 17, 2005, automatic stay terminates 60 days after a request for relief from stay unless final decision on request is rendered by court within the 60-day period or period is extended by agreement or by court for specific period of time found necessary for good cause.2
1994) (“[t]he 362(a)(1) stay applies to actions that are ‘against the debtor’ at their inception, regardless of the subsequent appellate posture of the case”); Ellis v. Consolidated Diesel Elec. Corp., 894 F.2d 371, 373 (10th Cir. 1990) (operation of stay should not depend upon whether district
So.2d 1045 (Fla. App. 2d Dist. 1992) (held, automatic stay did not stop action against general partner in partnership debtor or against general partner’s general partner).
Technologies), 303 B.R. 753 (W.D. Pa. 2004), vacated in part, modified in part on other grounds, 2004 WL 555418 (Bankr. W.D.Pa. Mar. 19, 2004) (held, state court action brought by insurers for declaratory judgment regarding non-debtor’s rights in insurance policies it shared with debtor violated automatic stay even though debtor was not named as defendant in state court action because outcome of state action could affect debtor’s rights in shared insurance); Teachers Ins. & Annuity Assoc. of America v. Butler, 803 F.2d 61, 65 (2d Cir. 1986) (referred to A.H. Robins decision as case with “unusual circumstances”). Compare In re Transervice Logistics, Inc., 304 B.R. 805 (Bankr. S.D. Ohio 2004) (declining to extend automatic stay to non-debtor co-defendants because, unlike situation in A.H. Robins, defendant-debtor only faced one suit, not thousands, and thus would not be barraged by discovery and litigation).
g. Proceedings or claims arising post-petition are not subject to automatic stay, although successful plaintiff must obtain relief from stay if it seeks to enforce judgment against estate.8 Bellini Imports, Ltd. v. Mason & Dixon Lines, Inc., 944 F.2d 199 (4th Cir. 1991) (automatic stay did not bar institution of action arising out of alleged postpetition breach of contract); Erickson v. Polk, 921 F.2d 200 (8th Cir. 1990) (lessor of farmland did not violate automatic stay when it retook possession of property following postpetition expiration of lease); In re Dominguez, 312 B.R. 499 (Bankr. S.D.N.Y. 2004) (prepetition lapse of debtor-taxpayer’s redemption period may constitute “cause” for lifting stay to allow tax authority to exercise its
rights in debtor’s real property; it did not relieve taxing authority’s obligation to move first for modification of stay).
7 The court ignored its own precedent in coming to this bizarre result, but justified it by reasoning that adjudication of a claim against the wholly-owned corporation would have an “immediate adverse economic impact” on the debtor. But see Feldman v. Trustees of Beck Ind., Inc. (In re Beck Ind., Inc.), 725 F.2d 880 (2d Cir. 1973) (court cannot enjoin suit against solvent independent subsidiary of debtor merely because stock is held by debtor in reorganization); In re Unishops, Inc., 374 F.Supp. 424 (S.D.N.Y. 1974) (bankruptcy court lacks jurisdiction to grant a stay of court proceedings against subsidiaries).
a debtor’s tax benefits (e.g., net operating losses) are property of the estate, thus subject to the automatic stay. See In re UAL Corp., 412 F.3d 775 (7th Cir. 2005) (finding bankruptcy court’s injunction restricting trading in debtor’s securities to protect tax benefits to be “problematic on the merits,” and questioning court’s reliance on Bankruptcy Code §§ 105(a) and 362 as basis for trading procedures order). Compare In Prudential Lines, Inc., 928 F.2d 565 (2d Cir. 1991) (finding debtor’s tax benefits to be estate property, and that automatic stay thus enjoined debtor’s parent from taking worthless stock deduction on parent’s tax return).
(but not the perfection of mechanic’s lien9 — §§ 362(b)(3) and 546(b) — or when perfection occurs within the 10-day period after the time of effective transfer of the property, under §§ 362(b)(3), and 547(e)(2)(A)). 11 U.S.C. § 362(a)(4).
9 The mechanic’s lienor will ordinarily be able to perfect its lien after bankruptcy for work performed prior to bankruptcy. See generally, In re Yobe Electric, Inc., 728 F.2d 207, 208 (3d Cir. 1984) (per curiam) (service of notice of intent to file mechanic’s lien did not violate stay since under state statute “perfection of mechanic’s lien ‘relates back’ to the installation of the first material”); In re Lionel Corp., 29 F.3d 88 (2d Cir. 1994) (held, no automatic stay violation resulted from mechanics’ lienors’ post-petition serving notice of lien upon lessors and chapter 11 debtor lessee, when New York law permitted perfection of filed mechanics’ lien after another entity had acquired rights to the property).
See In re Fuller, 134 B.R. 945 (B.A.P. 9th Cir. 1992) (held, automatic stay prevents creation or perfection of lien, even by operation of law).
(i) Section 362(b)(3) subjects a creditor’s right to “perfect, or to maintain or continue the perfection of, an interest in property” to Section 546(b) of Code. 11 U.S.C. §362(b)(3).
(ii) In turn, Section 546(b) limits the trustee’s powers to avoid statutory liens by providing that they “are subject to any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection.” 11 U.S.C. §546(b)(1)(A) (emphasis added); see, e.g., In re AR Accessories Group, Inc., 345 F.3d 454, 458 (7th Cir. 2003) (held, priming statute need not contain language expressly providing for retroactive perfection in order to trigger exception provided in 11 U.S.C. §546(b)(1)(A)); In re Hayden, 308 B.R. 428 (B.A.P. 9th Cir. 2004) (held, towing operator did not violate automatic stay in refusing to surrender possession of debtor’s vehicle, which was towed prepetition, unless debtor first paid towing charges because towing operator was merely acting to maintain or continue possession of its lien, not to enforce it).
prepetition claims. 11 U.S.C. § 362(a)(5). See, e.g., In re Birney, 200 F.3d 225 227 (4th Cir. 1999) (Section 362(a)(5) prohibits “any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title”).
debtor.” 11 U.S.C. § 362(a)(6). Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 423 (6th Cir. 2000) (a course of conduct violates § 362(a)(6) if it “(1) could reasonably be expected to have a significant impact on the debtor’s determination as to whether to repay, and (2) is contrary to what a reasonable person would consider to be fair under the circumstances”) (quoting In re Briggs, 143 B.R. 438 453 (Bankr. E.D. Mich. 1992)); see also In re Diamond, 346 F.3d 224, 227-28 (1st Cir. 2003) (settlement negotiations challenging Chapter 7 debtor’s discharge do not violate the automatic stay per se, but creditor’s threat to seek revocation of debtor’s real estate license during negotiations was coercive, thus dismissal of
debtor’s complaint proper); In re Optel, Inc., 60 Fed.Appx. 390 (3d Cir. March 25, 2003) (sale agreement between creditor and debtor provided that debtor either pay $6 million lump sum payment or, if creditor requested, $10 million over time; held, automatic stay prohibited creditor from requesting the $10 million deferred payment, therefore creditor was only entitled to distribution on $6 million claim); In re Jamo, 283 F.3d 392, 399 (1st Cir. 2002) (“a creditor may engage in post petition negotiations pertaining to a bankruptcy-related reaffirmation agreement so long as the creditor does not engage in coercive or harassing tactics”).
7. Setoffs of any prepetition debt owing to the debtor. 11 U.S.C. § 362(a)(7). See Newbery Corp. v. Fireman’s Fund Ins. Co., 95 F.3d 1392 (9th Cir. 1996) (right of setoff is subject to automatic stay provisions of chapter 11); Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995) (temporary administrative freeze by bank not a stay violation or setoff; intent to settle accounts permanently is required for setoff within meaning of automatic stay provisions). Compare Jimenez v. Wells Fargo Bank, N.A., 335 B.R. 450 (Bankr. D. N.M. Dec. 21, 2005) (temporary administrative freeze by bank, without right of setoff, violated automatic stay); In re Calvin, 329 B.R. 589 (Bankr. S.D. Tex. 2005) (bank’s administrative freeze of debtor’s account violated automatic stay when bank was not creditor of debtor and thus had no right of setoff); In re Cullen, 329 BR. 52
(Bankr. N.D. Iowa 2005) (bank’s administrative freeze of account jointly held by debtor and debtor’s father violated automatic stay because freeze was intended to continue indefinitely until bankruptcy case was closed; bank did not have valid right of setoff because funds in account were property of debtor’s father and mutuality requirement for setoff thus was lacking).
paychecks because the payments were not part of the same transaction); In re Delicruz, 300 B.R. 669 (Bankr. E.D. Mich. 2003) (“recoupment reduces
10 “Recoupment” has been defined as follows: “. . . so long as the creditor’s claim arises out of the identical transaction as the debtor’s, that claim may be offset against the debt owed to the debtor, without concern” for the Code’s setoff limitations. In re University Medical Center, 973 F.2d 1065, 1080 (3d Cir. 1992). Recoupment in bankruptcy has been narrowly construed by courts because it violates the basic bankruptcy principle of equal distribution. In re B & L Oil Co., 782 F.2d 155, 158 (10th Cir. 1986) (“[a] fundamental tenet of bankruptcy law is that . . . [once] a petition is filed, debts that arose before the petition may not be satisfied through post-petition transactions. This is seen in bankruptcy restrictions on setoffs [and recoupment].”); In re McMahon, 129 F.3d 93, 97 (2d Cir. 1997) (“in light of the Bankruptcy Code’s strong policy favoring equal treatment of creditors, recoupment . . . should be narrowly construed”).
• As of October 17, 2005, § 362(a)(8) is limited to proceedings