Requesting and obtaining continuances of a prepetition lawsuit against a debtor do not violate the automatic stay in Section 362(a), according to the Ninth Circuit Bankruptcy Appellate Panel.
In other words, a creditor is not required to dismiss a prepetition lawsuit after the defendant files bankruptcy.
Another Matrimonial Seeps into Bankruptcy Court
A matrimonial slopped over into bankruptcy court.
The wife filed for divorce in California. The matrimonial court awarded the couple’s home to the husband and gave the wife a $29,000 “equalization payment” to be evidenced by a note and a mortgage on the home.
The husband signed neither the note nor the mortgage.
The wife filed proceedings in matrimonial court to have the clerk sign the note and mortgage in place of the husband and to assess $10,000 in sanctions and attorneys’ fees against the husband.
Two weeks before the hearing in state court, the husband filed a chapter 13 petition. The hearing in state court went ahead as something akin to a status conference, and the matter was continued twice. Before the hearing on the third continuance, the debtor’s lawyer wrote to say that hearings on continuances violated the automatic stay.
The wife’s counsel went ahead with the hearing and obtained an adjournment to a date that was more than two years after the chapter 13 filing. After the hearing, the debtor filed a contempt motion, claiming that the requests for continuances were willful violations of the automatic stay under Section 362(a)(1) and (5). The debtor also wanted $1,400 in attorneys’ fees for prosecuting the contempt proceeding.
The contempt motion won no traction from Bankruptcy Judge Dennis Montali. He called it “frivolous” and denied the contempt motion.
Continuances Don’t Upset the Status Quo
The Ninth Circuit had no precedents on point. However, the October 8 opinion for the BAP by Bankruptcy Judge Julia W. Brand cited bankruptcy court decisions from Texas and Chicago holding that status conferences and continuances do not violate the automatic stay.
For guidance in her circuit, Judge Brand analogized the appeal before her to First Nat'l Bank of Anchorage v. Roach (In re Roach), 660 F.2d 1316 (9th Cir. 1981), where the Ninth Circuit held that postponement and rescheduling of prepetition foreclosure sales do not violate the stay.
Of course, events that transpired at the status conferences might inform the bankruptcy court on the question of whether stay violations were actually taking place. However, the debtor did not introduce any transcripts of the status conferences.
According to Judge Brand, the state court’s minutes were the only evidence about what happened, and the minutes only showed continuances or the wife’s requests for them.
Judge Brand said that “[t]hese actions do not disturb the status quo.” She held that “continuances . . . , whether ordered by the court, done by the clerk, or requested by [the wife] did not violate the automatic stay.” She upheld Judge Montali’s dismissal.
Requesting and obtaining continuances of a prepetition lawsuit against a debtor do not violate the automatic stay in Section 362(a), according to the Ninth Circuit Bankruptcy Appellate Panel.
In other words, a creditor is not required to dismiss a prepetition lawsuit after the defendant files bankruptcy.
Another Matrimonial Seeps into Bankruptcy Court
A matrimonial slopped over into bankruptcy court.
The wife filed for divorce in California. The matrimonial court awarded the couple’s home to the husband and gave the wife a $29,000 “equalization payment” to be evidenced by a note and a mortgage on the home.
The husband signed neither the note nor the mortgage.
The wife filed proceedings in matrimonial court to have the clerk sign the note and mortgage in place of the husband and to assess $10,000 in sanctions and attorneys’ fees against the husband.