In January 2020, we analyzed a split among the Circuit Courts regarding whether a non-debtor holding a debtor’s property on the petition date has an affirmative obligation under section 362(a)(3) of the Bankruptcy Code to return that property to the debtor immediately following the filing of the bankruptcy petition.
If a creditor is holding property of a party that files bankruptcy, is it “exercising control over” such property (and violating the automatic stay) by refusing the debtor’s turnover demands? According to the Supreme Court, the answer is no – instead, the stay under Section 362(a)(3) of the Bankruptcy Code only applies to affirmative acts that disturb the status quo as of the filing date. In other words, the mere retention of property of a debtor after the filing of a bankruptcy case does not violate the automatic stay.
Key Contacts:
On 18 January 2021, the Court of Appeal in Md Isa Bujang v CIMB Bank Berhad dismissed a bankrupt’s appeal against a High Court decision that struck out his claim for, inter alia, damages of RM22,445,601.64 against CIMB Bank Berhad for delay in the auction of his property charged to the Bank. The Bank was represented by our Partner, Claudia Cheah and Senior Associate, Aufa Radzi.
Key points
The High Court has dismissed a strike out application in respect of a claim brought under section 423 of the Insolvency Act 1986 (“IA 1986”) in respect of an alleged transaction defrauding creditors, holding that it is not necessary to prove a freestanding connection between the defendant and England, separate from the litigation itself, in order to obtain relief: Suppipat v Narongdej [2020] EWHC 3191 (Comm).
Alerts and Updates
The Court’s decision provides greater certainty for creditors who passively retain estate property that they obtained pre-petition.
On January 14, 2021, the Supreme Court held in City of Chicago v. Fulton that a creditor does not violate the automatic stay by merely retaining possession of the debtor’s property after a bankruptcy filing. The City of Chicago routinely impounded vehicles owned by drivers with outstanding parking tickets and other fines. The City refused to release the impounded vehicles after the owner of the vehicle filed bankruptcy. The Court of Appeals for the Seventh Circuit held that the City’s retention of the vehicles violated the automatic stay.
The U.S. Court of Appeals for the Sixth Circuit recently held that loans incurred by a debtor to pay university tuition were “qualified education loans” under the Bankruptcy Code and thus were not dischargeable.
In so ruling, the Sixth Circuit rejected the debtor’s arguments that:
On January 14, 2021, the Supreme Court of the United States resolved a circuit split by unanimously holding that the “mere retention of property” by a creditor after the time a debtor files its bankruptcy petition does not violate the automatic stay under § 362(a)(3) of the United States Bankruptcy Code, 11 U.S.C. §§ 101, et seq. (“Bankruptcy Code”). In City of Chicago v.
In a pair of significant judgments issued on the same day, Re China Huiyuan Juice Group Ltd. [2020] HKCFI 2940 and FDG Electric Vehicles Ltd. [2020] HKCFI 2931, the Honorable Mr. Justice Harris has once again issued highly relevant and timely guidance on key cross-border insolvency issues.
India is the seventh largest country in the world spread over a total area of 32,87,263 sq kms, including the territorial seas. Located in South Asia in the tropical belt just north of the equator, it is separated from mainland Asia by the Himalayas, a mountain range that umbrellas the entire northern region stretching to a distance of 2,400 kms to the east. India is home to some of the world‟s highest peaks shielding the country‟s 281 States and 82 Union Territories. Several important rivers originate from this mountain range.