03.10.09
Makes the Old Head Spin
You ever wonder why it seems like attorneys engage in double-talk? It’s because they’re always dealing with dual concerns. Consider this fact pattern issue from a recent 6th Circuit Bankruptcy Court decision: “Does a creditor willfully violate the automatic stay when, after receiving notice of bankruptcy, it keeps funds that it received from the post-petition cashing of a pre-petition post-dated check and conditions return of the funds?”
I had to read that three times.
If you’re curious, the answer is “no.” The Court cited a few reasons. The most compelling (in my opinion): Section 362(b)(11) of the Bankruptcy Code exempts from the stay “the presentment of a negotiable instrument and the giving of notice of and protesting dishonor of such an instrument.”
The Court, however, noted that the transfer might be subject to avoidance on other grounds (in other words, the lender might not get to keep the funds after all, but at least it wasn’t subject to penalties for violating the Automatic Stay).
