Case Summary:
Plaintiff Chapter 7 Trustee filed an adversary proceeding seeking (i) a determination that Defendant’s asserted lien was invalid under state law, and (ii) an injunction enjoining Defendant from continuing state court litigation and collection efforts. Plaintiff filed a motion seeking a preliminary injunction and an order enforcing the automatic stay. Defendant responded arguing that its state court litigation concerned non-debtor third parties and revolved around issues of state law. The Court ruled for Plaintiff. Even though there were other parties to the various state court proceedings, Defendant sought sales proceeds that were property of the estate in each of the cases. The automatic stay prohibits litigation or collection efforts seeking control or turnover of property of the estate. Property of the estate is broad and extends to even contingent interests of debtors. Thus, the Court granted Plaintiff’s motion and enjoined Defendant’s state court proceedings during the pendency of this adversary proceeding.
Statute/Rule References:
11 U.S.C. § 362(a)(3) -- Automatic stay
11 U.S.C. § 541(a) -- Property of the estate
28 U.S.C. § 157(b)(2)(K) -- Determinations of the validity, extent, or priority of liens
28 U.S.C. § 1334(e) -- Exclusive jurisdiction over property of the estate
Key Terms:
Automatic Stay
Core Proceeding
Exclusive Jurisdiction
Preliminary Injunction
Property of the Estate