Daniel J. Weiner on the Automatic Stay in Partnership Bankruptcies

Daniel J. Weiner on the Automatic Stay in Partnership Bankruptcies

by Daniel J. Weiner

In this Emerging Issues Analysis, Daniel J. Weiner examines the treatment of the automatic stay in partnership bankruptcies, including the treatment of stay actions against non-debtor general partners by courts relying upon the automatic stay provisions under Bankruptcy Code section 362 or the equitable powers under section 105(a) and the treatment of stay actions against the partnership when a general partner is a debtor.

Excerpt:

In partnership bankruptcies, courts have relied on several provisions of the Code to extend the protection of the automatic stay to the assets of non-debtor general partners. Some courts have relied on section 362(a)(3) which prohibits "any act to obtain possession of property of the estate or property from the estate or to exercise control over property of the estate" to prevent creditor actions against the general partners of a debtor partnership. Others have relied on 11 U.S.C. § 362(a)(1) which stays an "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... ." And still other courts have relied on Code section 105(a) as the statutory basis to enjoin proceedings or actions against non-debtors where such actions would interfere with, deplete or adversely affect property of the estate, frustrate the statutory scheme embodied in Chapter 11 or impair the debtor's ability to reorganize.

The Supreme Court's opinion in United States v. Whiting Pools, Inc., is based on a broad interpretation of what property is included in the "property of the estate" as defined by section 541(a)(1). As a result of the broad interpretations of what is considered property of the estate under the Bankruptcy Code, it is arguable that a general partner's property would be considered property of the partnership estate. Accordingly, it is important to understand whether the automatic stay provision of the Bankruptcy Code would extend to actions by the partnership's creditor(s) against the general partner as well as whether the converse is true.

This article examines the treatment of stay actions against non-debtor general partners by courts relying upon the automatic stay provisions under Bankruptcy Code section 362 or the equitable powers under section 105(a) and the treatment of stay actions against the partnership when a general partner is a debtor. [footnote omitted]

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Daniel J. Weiner is a founding partner of Schafer & Weiner, PLLC located in Bloomfield Hills, Michigan. He graduated with a B.A. in Philosophy with high honors from the Honors College of Michigan State University in 1977 and received Phi Beta Kappa and Phi Kappa Phi distinctions. Mr. Weiner earned his J.D. from Hofstra University School of Law, graduating with special litigation awards and was selected to Hofstra's National Trial Advocacy Team in 1980. Mr. Weiner was also admitted to the Florida Bar in 1983.

Mr. Weiner has served as a visiting lecturer on bankruptcy, debtor/creditor and other commercial topics in the United States and Canada and has co-authored Swords and Shields--Prepayment Premiums In and Out of Bankruptcy, The Michigan Business Law Journal, Fall 2003. He is the contributing author of chapter 20, "Partnership and Partner Bankruptcies" of the Collier Bankruptcy Practice Guide (LexisNexis Matthew Bender). He is also an active member of the Mediation Panel of the United States Bankruptcy Court for Michigan's Eastern District.