Recent Developments In Bankruptcy Law, April 2021

1. AUTOMATIC STAY

1.1 Covered Activities

1.1.a The debtor violated numerous state court orders in actions to recover amounts he misappropriated. The state court held him in contempt and imposed monetary sanctions and ordered him to stop managing property he did not own and to turnover proceeds from the illegal management. The debtor filed his bankruptcy petition the day before a state court hearing on sentencing the debtor to jail for contempt. Section 362(a) stays any prepetition action or proceeding against the debtor, but section 362(b)(4) excepts from the stay any action by a governmental unit to enforce its police or regulatory power.” The exception applies when the government's action is to effectuate a public policy to protect public safety and welfare or is to further its own interest but not if the government proceeds for a pecuniary purpose to recover property from the estate. The state court is a governmental unit, and its order to stop managing the