High Court: Merely Retaining Estate Property Is Not a Stay Violation
From a debtor's perspective, the automatic stay is one of the Bankruptcy Code's most important protections, yet creates dangerous minefields for unwary creditors.
February 04, 2021 at 12:42 PM
8 minute read
From a debtor's perspective, the automatic stay is one of the Bankruptcy Code's most important protections, yet creates dangerous minefields for unwary creditors. Housed in Section 362, it imposes the foundational ground rule for bankruptcy proceedings: that, from the moment of filing, creditors cannot take action against the estate or its property to collect pre-petition debts. Not only does it protect the debtor, but it is also intended to foster order and efficiency while the estate is being administered. Thus, given its importance to the bankruptcy process, a recent decision by the U.S. Supreme Court represents a paradigm shift by rejecting the majority view previously adopted by the lower court concerning the scope of the stay. See, City of Chicago, Illinois v. Fulton, No. 19-357, 592 U.S. ___ (U.S. 2021).
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