Chapter 11, A. Automatic Stay

• Jurisdiction: United States

A. Automatic Stay

The filing of a bankruptcy petition operates as a stay, applicable to all entities, of the commencement or continuation of any proceeding against the debtor that was or could have been commenced prior to the filing of the bankruptcy petition.²⁹³ This applies to both involuntary and voluntary bankruptcy cases.²⁹⁴ In addition to the stay of litigation against the debtor, the automatic stay also operates to stay "any action to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate."²⁹⁵

The automatic stay only applies to pre-petition claims that could have been commenced before the filing of the bankruptcy petition. The automatic stay does not apply to claims that arise post-petition and could not have been asserted against the debtor prior to the filing of bankruptcy.²⁹⁶

The automatic stay will prevent a personal-injury or general-liability claimant from filing a complaint against a debtor or from continuing with existing litigation. The claimant must first obtain a modification of the automatic stay in order to proceed with the nonbankruptcy litigation.

It should be noted that while the automatic stay prohibits the pursuit of any claim against the debtor, it does not prevent the debtor from pursuing claims that it may have against third parties. The automatic stay provision applies only to actions brought against the bankruptcy debtor, not those brought by the debtor.²⁹⁷ This is true even when the plaintiffin litigation has had an involuntary bankruptcy petition filed against it.²⁹⁸

--------

Notes:

^[293] 11 U.S.C. § 362.

^[294] See, e.g., Carley Capital Group v. Fireman's Fund Insurance Co., 889 F.2d 1126 (D. D.C. Cir. 1989).

^[295] 11 U.S.C. § 362(a)(3).

^[296] See Federal Press Co., 117 B.R. 942 (Bankr. N.D. Ind. 1990); Avellino & Bienes v. M. Frenville Co., 744 F.2d 332 (3d Cir. 1984).

^[297] Mesiti v. Microdot Inc., 156 B.R. 113, (D. N.H. 1993); see also Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991) (automatic stay provision of Bankruptcy Code does not address actions brought by debtor for benefit of estate).

^[298] Taraska v. Carmel, 223 B.R. 200 (D...