Legal Memorandum: Protection Afforded by Filing for Bankruptcy

Issue: What protection does the filing of bankruptcy afford a Defendant in a lawsuit pending in Superior Court?

Area of Law: Bankruptcy & Creditors Rights
Keywords: Bankruptcy petition; Protection
Jurisdiction: Federal
Cited Cases: None
Cited Statutes: 11 U.S.C. § 362(a), § 362(c), § 362(g), § 362(d), § 523(a)(2)
Date: 02/01/2008

  The filing of a petition under the U.S. Bankruptcy Code, regardless of whether it is filed as a Chapter 7 (Liquidation) or a Chapter 11 (Reorganization) entitles the debtor to relief from the prosecution of pending litigation and the filing of potential litigation.  The protection is available automatically, on filing of the case.  The automatic stay prohibits

the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.

11 U.S.C. § 362(a) (1993 & Supp. 2000).  The protection of the stay remains in effect throughout the bankruptcy proceedings and continues in force to protect

 (1)       [p]roperty of the estate . . . until such property is no longer property of the estate; [or]

(2)        [against] any other act . . . until the earliest of‑‑

(A)       the time the case is closed;

(B)       the time the case is dismissed;  or

(C)       if the case is a case under chapter 7 of this title concerning an individual or a case under chapter 9, 11, 12, or 13 of this title, the time a discharge is granted or denied.

Id. § 362(c).  There is no formal procedure set out in the Bankruptcy […]

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