Yesterday, the Supreme Court granted certiorari in City of Chicago v. Fulton, 19-357 (Sup. Ct.), to resolve a circuit split and decide whether inaction can violate the automatic stay under Section 362(a), Rochelle's Daily Wire reported. The case will likely be argued and decided before the high court’s term ends in late June. An opinion by Bankruptcy Judge Brian F. Kenney of Alexandria, Va., demonstrates how the Supreme Court could dramatically impair the efficacy of bankruptcy by ruling that creditors are not required to unwind actions they have already taken when notified of bankruptcy. Former matrimonial counsel had a judgment against the debtor for more than $10,000. The law firm had obtained a garnishment order under which $1,000 was being held by the clerk of the state court after having been deducted from the debtor’s wages. A hearing was scheduled in state court to rule on turning the garnished funds over to the firm as the judgment creditor. One month before the hearing in state court, the debtor filed a chapter 7 petition, listed the judgment as a debt, gave notice of the filing to the judgment creditor, claimed an exemption in the $1,000, and filed a suggestion of bankruptcy in the state court. Claiming to have performed legal research, the judgment creditor responded to the debtor by saying he was unaware of any obligation to take affirmative action to terminate the garnishment. The judgment creditor said he would appear in state court on the return date, where he expected the state court judge would rule “as the Court deems appropriate.”
