Citing Ninth Circuit precedent from cases under the Bankruptcy Act, the Ninth Circuit BAP reluctantly held that a pre-petition state court civil contempt proceeding is exempt from the automatic stay of sec. 362 of the Bankruptcy Code. The decision of the BAP is Yellow Express, LLC v. Mark Dingley (In re: Dingley), 514 B.R. 591 (9th Cir. BAP 2014).
This article was first published in the summer 2014 issue of NABTalk, the publication of the National Association of Bankruptcy Trustees.
In the first decision, the U.S. Court of Appeals for the Sixth Circuit affirmed the district court decision, concluding that a defendant’s bankruptcy filing does not prevent the district court from ruling on a contempt motion for violation of a temporary restraining order protecting plaintiff’s trademarks. Dominic’s Restaurant of Dayton, Inc. v. Mantia, Case Nos. 10-3376; -3377 (6th Circuit July 5, 2012) (Batchelder, C.J.; McKeague, J.; Quist, D.J., sitting by designation).
To a business litigator, the bankruptcy debtor’s most effective weapon is often the automatic stay, which is commonly used – or abused, depending on the perspective – to, inter alia, stay all pending litigation against the debtor and keep him in sole control of an asset, despite seeming abuses of that control.
All too often, after a debtor receives his or her discharge in bankruptcy and after the case has been closed, a creditor whose debt has been discharged does something which may appear to constitute an effort to collect that debt. This may range from the sending of an informational account statement by the mortgagee on a home surrendered in the bankruptcy, filing a proof of claim in a subsequent bankruptcy case, to filing of a lawsuit to collect the discharged debt.
In order to get the information necessary to seize a debtor's assets or garnish his income, Rule 60.18 of the Rules of Court permit a creditor to require a debtor to attend an examination under oath before a court reporter and be questioned in relation to:
(a) the reason for non-payment or non-performance of the judgment;
(b) the debtor's income and property;
(c) the debts owed to and by the debtor;
(d) the disposal the debtor has made of any property either before or after the making of the order;
The next time you negotiate a settlement payment with a financially troubled party, you may want to keep in mind an ancient term related to livestock herding: earmarking. The concept may be somewhat antiquated, but the Second Circuit has recently confirmed that it is still viable – and can help you keep the settlement payment if the other party later files for bankruptcy.
U.S. v. Henry, Case No. 08-003 (W.D. Va. July 1, 2008)
In In re Arch Wireless,1 the United States Court of Appeals for the First Circuit held that a creditor who asserted claims against the debtor in various correspondence between the parties was a “known” claimant of the debtor’s estate entitled to direct notice of the bar date by which it must file a proof of claim. The Court of Appeals concluded that publication notice was insufficient to inform the creditor of the bar date or of the terms of the confirmed plan, even though the creditor was generally aware of the debtor’s bankruptcy filing.
Summary