Zack v. Transp. All. Bank (In re Zack) - 623 B.R. 168 (Bankr. W.D. Pa. 2020)

Rule:

That a creditor's collection activities against a nondebtor do not implicate the automatic stay is reflected in the plain language of 11 U.S.C.S. § 362(a), which enjoins acts of creditors to collect, assess, or recover a claim against the debtor that arose before the commencement of the case. § 362(a)(6). Cases decided in this area hold that formal distinctions between debtor-affiliated entities are maintained when applying the automatic stay. For instance, the Third Circuit has held that a proceeding against a non-bankrupt corporation is not automatically stayed by the bankruptcy of its principal.

Facts:

This Adversary Proceeding includes a cause of action by William E. Zack, Sr. and Kimberly S. Zack (collectively, the "Debtors") against Transportation Alliance Bank d/b/a TAB Bank ("TAB Bank") for damages resulting from an alleged violation of the automatic stay. According to the Complaint, the Debtors contend that after the commencement of the Debtors' bankruptcy, TAB Bank violated the automatic stay by placing phone calls and directing emails to the Debtors in an effort to collect a pre-petition commercial loan obligation due TAB Bank. The procedural posture through which this dispute is ripe for adjudication is by way of a Motion for Summary Judgment filed by TAB Bank. By the Motion for Summary Judgment, TAB Bank asserts that its post-bankruptcy debt collection activities were directed against KBZ Transport, LLC, which is an affiliate of the Debtors. Because the collection activity was directed against a third-party, TAB Bank argues that its collection activity cannot constitute " actions against" the Debtors which would be subject to the automatic stay of 11 U.S.C. § 362(a). According to TAB Bank, no evidence has been produced by the Debtors which refutes the evidence indicating that TAB Bank's efforts to collect a debt was directed to a non-debtor third party. Accordingly, TAB Bank contends that no genuine issue of material fact exists with respect to TAB Bank's collection efforts against KBZ Transport, LLC and therefore TAB Bank requests that summary judgment be entered in its favor dismissing this Adversary Proceeding with prejudice.

Issue:

Was there a violation of the automatic stay under 11 U.S.C.S. § 362(a) when TAB Bank placed phone calls and directed emails to the Debtors in an effort to collect a pre-petition commercial loan obligation due TAB Bank?

Answer:

No.

Conclusion:

The court held that because a creditor's post-bankruptcy collection efforts were directed to a non-debtor affiliate of debtor, there was no violation of the automatic stay under 11 U.S.C.S. § 362(a). The law provides that a nondebtor cannot avail itself of the protections of the automatic stay absent it filing its own bankruptcy petition.