AUTOMATIC STAY: The Bank froze the debtor’s accounts after the filing of the bankruptcy, and notified the trustee and the debtor. The bank did not use the funds as a set off for any debt. This is sometimes referred to as an administrative hold upon the debtor’s account. The court held that this action, all by itself, did not constitute a violation of the automatic stay; the bank requested information from the trustee, after making the trustee aware of the freeze on the account. The trustee did not respond. The actions of the bank constituted no violation of law. Mwangi v. Wells Fargo Bank 764 F.3d 1168 (CA9, 2014)
AUTOMATIC STAY: Corporate debtor was sued in class-action in New Mexico state court, prior to filing bankruptcy. As part of his bankruptcy, the corporate debtor asked to remove the class action to Bankruptcy Court. This removal was not barred by the automatic stay, which would have been an absurd result that could prevent even the filing of a Proof of Claim. In re Cashco, Inc. 598 B.R. 9 (2019), citing to, among others, In re North County Village 135 B.R. 641 (1992), and In re Miller, 397 F.3d 726 (2005).
BANKRUPTCY LAW (Importance of Automatic Stay); When a debtor files for bankruptcy, 11 USC Section 362(a)(1) automatically stays any other judicial proceeding involving the debtor. The automatic stay “plays a vital role in bankruptcy. The automatic stay aids the debtor in getting a financial fresh start. The automatic stay is “one of the fundamental debtor protections provided by the bankruptcy laws.” The stay promotes stability of the bankruptcy estate for both the debtor and creditors. In re Schwartz, 954 F.2d 569, 571 (9th Cir.1992), cited in FAR OUT PRODUCTIONS, INC. v. OSKAR, 247 F.3d 986, 994-995 (2001)
BANKRUPTCY LAW (Expansiveness of Automatic Stay): Automatic stay of 11 USC Sec. 362 applies to bar actions against debtor and against the bankruptcy estate. This automatic stay protects the debtor, as well as the assets of the estate, and creditors. Actions that are barred include religious actions, such as a Jewish tribunal set up as a cross-complaint against the debtor, filed in an adversary action. The synagogue could not pursue its religious action against the debtor as long as the stay was in place.
In re Congregation of Birchos Yosef, 535 BR 629 (2015); Bankruptcy Court, Southern District of New York
Photo Credit: Beth Din of Benghazi, 1930,
BANKRUPTCY LAW (Student Loans): A former medical student was entitled to $440,000 in debt relief, because he was able to meet the following standards pursuant to Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395, 396 (2nd Cir. 1987).
“Under [11 U.S.C.] § 523(a)(8), [debtor]’s student loans may be discharged in full, in part, or not at all, based upon the extent to which the court finds the repayment of these loans would constitute an undue hardship. Craig, 579 F.3d at 1045-46. Both [debtor] and the [Department of Education] concede the court has authority to enter a partial discharge pursuant to its equitable authority under § 105(a). Saxman v. Educ. Credit Mgmt. BJR Corp. (In re Saxman), 325 F.3d 1168, 1174 (9th Cir. 2003) (holding that a debtor is entitled to a discharge of that portion of the student loan that meets the requirements of § 523(a)(8)); Educ. Credit. Mgmt. Corp. v. Jorgensen (In re Jorgensen), 479 B.R. 79, 86 (B.A.P. 9th Cir. 2012) (applying each element of the Brunner test to the partial discharge analysis).The Ninth Circuit in United Student Aid Funds v. Pena (In re Pena), 155 F.3d 1108, 1112 (9th Cir. 1998), adopted the three part test (“Brunner test”) for determining undue hardship articulated in Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395, 396 (2nd Cir. 1987):
(i) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for himself and his dependents if forced to repay the loans;
(ii) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
(iii) the debtor has made good faith efforts to repay the loans.”
> The debtor’s dire circumstances met this test.
> See the Court’s decision in In re Koeut, 622 B.R. 72 (2020)
BANKRUPTCY LAW (Automatic Stay): In en banc opinion, 9th Circuit holds that debtor can recover all fees spent in resisting creditor who violates automatic stay in seeking to collect debt (America’s Servicing Co. v. Schwartz-Tallard, originally issued 4/16/2014, San Francisco, modified Autumn 2015)