11 March 2014

The Automatic Stay of Bankruptcy: Timing Is Everything

The Nebraska Supreme Court has held that actually signing an order for judgement by the trial court is not a "ministerial act" and thus violates the automatic stay of Bankruptcy Code § 362(a). Doe v. Fireman's Fund Insurance Co. (February 21, 2014). Even though the defendant had defaulted in the plaintiff's lawsuit before filing bankruptcy, and even though the trial court had orally entered judgment for the plaintiff and requested the plaintiff's lawyer to prepare a written order for, entry of the order post-bankruptcy was void.

The Nebraska holding is consistent with my understanding. Many years ago I represented a lender seeking to foreclose a mortgage and gain possession of personal property collateral from a Christmas tree farm and golf course in northern Wisconsin. (You need to be creative to make a living in that part of the country.) We knew the defendant was considering bankruptcy so we asked the court to note on the record the time at which he orally rendered judgment in our favor and we had the foresight to bring written orders for judgment that the judge promptly signed. While I was reasonably confident that the subsequent docketing of the order by the clerk would be a ministerial act, free from the automatic stay, we managed to get it done before the debtor filed later that afternoon.

Who said that creditors' rights litigation couldn't be entertaining?

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