11 U.S.C. § 362

A bank does not willfully violate the automatic stay by placing an administrative hold on a debtor’s account and promptly seeking stay relief to determine its rights to the funds.

Erickson v. Citizens First National Bank (In Re Erickson) · filed 1998-01-21(h)

CITIZENS’ action can not be considered a willful violation of § 362, as it was following the procedure approved by the United States Supreme Court in order to get a judicial determination of its rights to the funds in the checking account, which the DEBTORS continued to use by both writing checks and making deposits.

Section 362’s automatic stay may be violated when a creditor freezes a tax refund to collect a prepetition claim without seeking relief from the stay.

Holden v. United States · filed 1997-11-12(a)(6), (a)(7)

Here, the result of the freeze imposed on the Holdens’ refund was the collection of a pre-petition claim without first seeking relief from the stay. This action, if pursued by any other entity, would be designated a setoff despite its denomination as temporary freeze.

Section 362(a)(6) can prohibit an open-ended freeze of a debtor’s tax refund used to coerce payment of a prepetition debt without seeking relief from the stay.

In Re Holden · filed 1997-11-12(a)(6)

In short, the fact that the IRS did not seek relief from the stay and would not provide the Holdens with the bulk of their refund until they initiated an adversary proceeding and executed a stipulation easily can be construed as "forbidden self-help in violation of the automatic bankruptcy stay."

Section 362 allows a bank or credit union to temporarily freeze a debtor’s deposit account to preserve the status quo pending judicial action without violating the automatic stay.

In Re Gifford · filed 1994-09-01(a)(7)

Accordingly, the Credit Union’s administrative freeze of the Giffords’ account was permissible to maintain the status quo. It did not constitute a violation of the automatic stay.

Section 362(a)(3) does not prohibit a bank from temporarily freezing a debtor’s account to determine who owns the funds when the bank is not asserting control over them for its own benefit.

Sousa v. Bank of Newport · filed 1994-03-24(a)(3)

However, when a bank freezes a bank account to allow time to determine the proper ownership of the funds, the bank is not exercising control over the property of the bankruptcy estate in violation of the automatic stay provision.

Section 362(a)(7) prevents a creditor from enforcing a prepetition setoff without court permission, and a creditor seeking an administrative freeze of deposited funds must move for relief from the stay.

In Re Cooks · filed 1993-07-19(a)(7)

Therefore, even though a creditor has a right to setoff, it is prevented from enforcing such right until the bankruptcy court grants permission to do so. The announced practice of the bankruptcy court in Dayton is to require a creditor to file a motion for relief from the automatic stay if the creditor wishes to place a temporary “administrative freeze” upon a debtor’s funds deposited with the creditor until the court determines the creditor’s rights in such funds.

Section 362(a)(7) prohibits a creditor from keeping a debtor’s funds frozen for an extended period to preserve setoff rights without seeking relief from the automatic stay.

Shugrue v. Chemical Bank, Inc. (In Re Ionosphere Clubs, Inc.) · filed 1995-01-26(a)(7)

Under the circumstances present here, Chemical’s withholding of the Retained Funds was a violation of the automatic stay. The “freeze” has continued far too long without any effort by Chemical to follow the Bankruptcy Code process for resolution. It is the continuation of the freeze as much as its imposition that violates the automatic stay.

Section 362(a)(3) does not prohibit a creditor with a right to setoff from temporarily freezing funds while its setoff rights are determined.

In Re Tillery · filed 1995-02-08(a)(3)

Since the Bankruptcy Code preserves the right to hold funds pending determination of the right to exercise setoff, a mere freeze under these facts is not a violation of section 362(a)(3).

Section 362(a)(3) does not prohibit a creditor with a right to setoff from temporarily freezing the debtor’s funds while that right is determined.

In Re Warwick · filed 1995-02-23(a)(3)

Since the Bankruptcy Code preserves the right to hold funds pending determination of the right to exercise setoff, a mere freeze under these facts is not a violation of section 362(a)(3).

Section 362(a)(7) does not prohibit a temporary freeze of an account to preserve funds pending a setoff determination when the creditor does not actually apply the funds to the debt.

In Re Laux · filed 1995-04-26(a)(7)

SCU’s freeze of debtor’s account merely preserved the status quo of the parties as of the petition date to allow the Court an opportunity to determine the proper disposition of the funds. ... Without proof that SCU actually exercised its right of setoff while the stay was in effect, debtor’s argument that SCU violated § 362(a)(7) must fail.

Section 362(a)(7) does not treat a bank’s temporary refusal to pay a debtor’s account balance while seeking relief from the stay to preserve setoff rights as a setoff.

Citizens Bank of Md. v. Strumpf · filed 1995-10-31(a)(7)

In our view, petitioner’s action was not a setoff within the meaning of § 362(a)(7). Petitioner refused to pay its debt, not permanently and absolutely, but only while it sought relief under § 362(d) from the automatic stay.

Section 362(a)(7) does not permit a creditor to retain a debtor’s tax refund indefinitely as a purported temporary freeze without obtaining or promptly seeking relief from the automatic stay.

In Re Glenn · filed 1996-07-10(a)(7)

In the Memo, we concluded that the IRS’s effectively permanent retention of the Refund without first securing or obtaining relief from the automatic stay was not a permissible temporary “freeze” of the Refund within the scope of Citizens Bank of Maryland v. Strumpf, — U.S.-, 116 S.Ct. 286,133 L.Ed.2d 258 (1995), but, rather, that the dispute was controlled by the principles of United States v. Norton, 717 F.2d 767 (3d Cir.1983).

Section 362(a)(7) prohibits a creditor from maintaining an administrative hold on a debtor’s account for months without seeking relief from the stay; such a hold constitutes an impermissible setoff.

Town of Hempstead Employees Federal Credit Union v. Wicks (In Re Wicks) · filed 1997-11-24(a)(7)

Applying the rules enunciated in Strumpf, the Court concludes that the Credit Union’s four-month-long administrative hold constituted an impermissible setoff in violation of the automatic stay.

Section 362(a)(7) bars a creditor from maintaining an account freeze indefinitely without seeking relief from the automatic stay.

In Re Orr · filed 1999-03-25(a)(7)

To conclude that an entity such as SEFCU is entitled to maintain a freeze or hold on a debtor’s account indefinitely without seeking relief from the automatic stay would make Code § 362(a)(7) superfluous.

Section 362(a)(3) prohibits an indefinite IRS freeze of a post-confirmation tax refund that is property of a Chapter 13 estate, and § 362(a)(6) prohibits withholding that refund to collect a prepetition tax debt when the IRS has no setoff right.

Holden v. United States of America (Internal Revenue Service) (In Re Holden) · filed 1999-07-21(a)(3), (a)(6)

For the reasons mentioned above, we find that the refund due Debtors was property of the estate under § 1306(a), and that IRS exercised control over that property in placing a V-freeze on the refund thereby violating § 362(a)(3). ... Accordingly, we find that IRS violated § 362(a)(6) when it withheld the Debtors’ refund.

A creditor may retain funds without violating the automatic stay while it timely seeks relief from stay or a determination of its right to setoff.

Stewart v. Army & Air Force Exchange Service (In Re Stewart) · filed 2000-09-18

Moreover, although the debtors assert that the retention of the federal income tax refund by the United States constitutes a violation of the stay, it is well settled that a creditor may, without violating the automatic stay, hold funds pending timely motion for relief from stay or other proceeding for a determination of a right to setoff.

Section 362(a)(7) bars a creditor from holding postpetition deposits for setoff against a prepetition claim when no mutual debt or setoff right exists.

Agricultural Federal Credit Union v. Harris (In Re Harris) · filed 2001-03-30(a)(7)

After the petition was filed, there existed no mutuality of debt because the debt owed by AFCU to Debtor — i.e., the payment of funds on deposit upon demand — arose after the commencement of the case. Since AFCU had no right to set off, it had no right to place an administrative hold on the account. By doing so, AFCU breached its agreement with Debtor, the depositor, by not paying the debt upon demand and violated the automatic stay.

Section 362(a)(3) does not prohibit a bank from temporarily freezing a debtor’s deposit account while seeking relief from the automatic stay.

In Re Czyzk · filed 2003-08-22(a)(3)

Because a bank account is a promise to pay from the bank to the depositor, and does not consist of money belonging to the depositor and held by the bank, placing an administrative freeze on a debtor’s demand account does not violate the stay.

Knowingly imposing an indefinite administrative hold on accounts to satisfy a debtor’s loans without seeking court permission is a willful violation of the automatic stay warranting sanctions.

In Re Cullen · filed 2005-08-16(a), (h)

Sanctions are appropriate in this case. Dupaco is a sophisticated player in the credit industry. It had knowledge of the bankruptcy filing and deliberately placed an indefinite hold on Gerald Cullen’s accounts because Debtor Chris Cullen was jointly named on the accounts. Dupaco intended to apply funds in these accounts against Debtors’ loans without seeking leave of the Bankruptcy Court. This constitutes a willful violation of the automatic stay.

Section 362(a)(3) and (a)(7) do not prohibit a bank without setoff rights from administratively freezing a Chapter 7 debtor’s account while awaiting the trustee’s instructions on disposition of estate funds.

Calvin v. Wells Fargo Bank, N.A. (In Re Calvin) · filed 2005-08-25(a)(3), (a)(7)

Because the Bank was not a creditor in this case and therefore had no set off rights, § 362(a)(7) is wholly inapplicable. ... For all of these reasons, this Court concludes that the Bank’s administrative freeze upon notice of the filing of Debtors’ petition was neither a violation of § 362(a)(3) nor § 362(a)(7).

Section 362(a)(3) protects unpaid tax refunds acquired after confirmation of a Chapter 13 plan as estate property, and allegations of prolonged withholding accompanied by statements of an intent to collect prepetition debt state a claim under Section 362(a)(6).

United States v. Harchar · filed 2007-06-06(a)(3), (a)(6)

Accordingly, the Court concludes that the Bankruptcy Court was correct in concluding that the unpaid tax refund is property for purposes of Section 362(a)(3). ... Accordingly, the Court agrees with the growing majority of other courts to address the issue that property acquired after confirmation of the chapter 13 plan is property of the estate. ... Here, Debtors’ allegations include express statements that the IRS was attempting to collect the debt as well as long delays and refusals to provide information regarding the overpayments. Accordingly, the Court agrees with the Bankruptcy Court that Debtors’ allegations state a claim under the broad standards for a Section 362(a)(6) claim noted above.

Section 362(a)(6) prohibits withholding pension benefits to collect a prepetition debt when no enforceable setoff right exists or when the creditor fails to promptly seek stay relief to exercise an asserted setoff right.

Radcliffe v. International Painters & Allied Trades Industry Pension Fund (In Re Radcliffe) · filed 2007-07-19(a)(6)

Its actions violated 11 U.S.C. § 362(a)(6) because International asserted a right of setoff with respect to a debt owing to the debtor that arose before the commencement of the case when no right of setoff existed, and because International failed to promptly seek relief from 11 U.S.C. § 362(a) in order to present its asserted right of setoff to the Court.

Under pre-BAPCPA § 362, the IRS's setoff of prepetition tax refunds against prepetition tax liabilities is stayed, and relief to permit the setoff rests within the bankruptcy court's discretion.

In Re Gould · filed 2008-03-31(a)(7)

Even though the IRS's right to set off is stayed by the automatic stay, the IRS, like any other creditor, may ask the court to lift the stay to allow it to exercise a right of setoff. ... The caselaw is clear that it is within the Court's discretion to grant or deny a motion for relief from stay to allow a party to effectuate a setoff.

Before BAPCPA, § 362(a)(7) stays IRS setoffs of prepetition tax refunds against prepetition tax liabilities, requiring relief from the stay to exercise the setoff.

In Re Gould · filed 2008-06-12(a)(7)

No exception is made under § 362 — at least as written prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the “BAPCPA”) — for setoffs by the IRS. ... Even though the IRS’s right to set off is stayed by the automatic stay, the IRS, like any other creditor, may ask the court to lift the stay to allow it to exercise a right of setoff.

An IRS administrative freeze of a debtor’s tax refund is not a per se violation of § 362(a)(3), and reasonably restrained delays to comply with bankruptcy law and assess bankruptcy rights do not violate § 362(a)(6).

Harchar v. United States (In Re Harchar) · filed 2008-07-14(a)(3), (a)(6)

In sum, the Court, for all these reasons, is not persuaded that the Defendant’s internal procedure of implementing a V-Freeze against a debtor’s tax refund will, as a matter of law, equate with a stay violation for purposes of 11 U.S.C. § 362(a)(3). ... As explained, the delay incurred in issuing the Debtors’ 1999 refund stemmed from the IRS seeking to accomplish two goals: (1) to ensure that it complied with bankruptcy law by not violating the automatic stay; and (2) to assess it rights under bankruptcy law, such as determining whether it had a right to setoff or whether, as occurred in this case, it could seek to modify the Debtors’ plan of reorganization. Restrained actions in the furtherance of these goals, such as the implementation of a V-Freeze, while possibly causing an inconvenience to a debtor, can hardly be said to constitute an action which would be contrary to what a reasonable person would consider to be fair under the circumstances.

Section 362(a)(3) does not prohibit a bank without a setoff claim from freezing Chapter 7 deposit accounts while making the funds available to the trustee and promptly following the trustee’s distribution instructions.

Wells Fargo Bank, N.A. v. Jimenez · filed 2008-08-06(a)(3)

In this Court’s view, Bank’s actions did not violate section 362(a)(3). ... In this case, Bank did not take any action to interfere with the orderly liquidation of the estate, or to prevent the Trustee from evaluating the available assets and determining proper distribution. Moreover, Bank did not “obtain possession of property of the estate” or “exercise control over property of the estate.” To the contrary, Bank relinquished control of the accounts to the Trustee. Although the accounts were unavailable to the Debtor (and presumably unavailable to any one else that may have attempted to access them, such as creditors or holders of checks written on the checking account), they were not unavailable to the Trustee. It is undisputed that Bank immediately contacted the Trustee upon receiving notification of the bankruptcy, acknowledged that the funds represented by the accounts were property of the estate, and indicated that it stood ready to follow the Trustee’s instructions regarding the funds. It is also undisputed that Bank promptly complied with Trustee’s instructions regarding the funds — it immediately released $4,000 to Debtor when instructed to do so by the Trustee.

Section 362(b)(26) permits the IRS to set off a prepetition income tax refund against a prepetition income tax liability without violating the automatic stay.

Ewing v. United States (In Re Ewing) · filed 2008-10-14(b)(26)

In this case, the IRS exercised its right under 26 U.S.C. § 6402(a) to set off the Debtor’s 2007 prepetition federal income tax refund against 1996 prepetition federal income tax liability. Thus, the IRS setoff falls squarely within the exception of § 362(b)(26) and does not violate the automatic stay.

Section 362 prohibits retaining estate property and completing a postpetition setoff with knowledge of the bankruptcy, but subsection (h) does not authorize punitive damages for a corporate debtor.

National Hydro-Vac Industrial Services, L.L.C. v. Federal Signal Corp. (In Re National Hydro-Vac Industrial Services, L. · filed 2004-06-15(a)(3), (a)(7), (h)

With knowledge of the pending bankruptcy case, Guzzler retained the Debtor’s property and accomplished the setoff after the Debtor was in bankruptcy. The Court can only conclude from the evidence that this was a willful violation of the automatic stay. ... However, the Court acknowledges that even though Guzzler willfully violated the automatic stay, the Debtor is not entitled to punitive damages under section 362(h) of the Bankruptcy Code because the Debtor is a corporation rather than an individual.

Section 362(a)(7) stays setoff of a prepetition debt even when the creditor did not know of the bankruptcy filing.

In Re Bourne · filed 2001-03-02(a)(7)

The IRS’s effectuation of the offset violated the automatic stay despite its lack of knowledge of the debtor’s bankruptcy case at that time.

Section 362(a)(3) prohibits a creditor from withholding a debtor’s tax refund while seeking to exercise a setoff right without promptly obtaining relief from the automatic stay.

Hudson v. United States Ex Rel. Internal Revenue Service (In Re Hudson) · filed 1994-01-31(a)(3)

Just as in Patterson, the conduct of the IRS in withholding the debtor’s refund, exercising control over property of the estate without expeditiously seeking relief from the stay in order to exercise its otherwise valid right of setoff violated the automatic stay.

Section 362(a)(7) stays offsets, but does not impose the same restriction on recoupments.

Zions First National Bank, N.A. v. Christiansen Bros. (In Re Davidson Lumber Sales, Inc.) · filed 1993-12-22(a)(7)

Offsets are barred by the automatic stay provision of Chapter 11, 11 U.S.C. § 362(a)(7). There is no similar restriction for recoupments.

Section 362(a)(7) bars a creditor from applying a prepetition utility security deposit to prepetition charges after the petition when the application is a setoff, unless the creditor obtains relief from the stay.

In Re Village Craftsman, Inc. · filed 1993-11-03(a)(7)

For all of the foregoing reasons, the court holds that the rights of a creditor in a security deposit in New Jersey are in the nature of setoff rather than recoupment, and any post-petition exercise of such rights is subject to the automatic stay of Code section 362(a).

Section 362(a)(7) bars a creditor from setting off and retaining a debtor’s tax refund against a prepetition tax debt after the bankruptcy filing.

In Re Davidson · filed 1990-08-24(a)(7)

In the instant case it is clear that the action of the IRS in setting off and retaining the income tax refund due to the debtor after the filing of the present case violated the automatic stay of § ,362.

Section 362(a)(7) stays the postpetition recoupment of overpaid Social Security benefits from later benefit payments as a setoff.

Lee v. Schweiker (In Re Schweiker) · filed 1982-11-16(a)(7)

First, it is averred that this type of recoupment is not subject to the automatic stay. This conclusion is in error. Section 362(a)(7) clearly stays “the setoff of any debt owing the debtor.. . against any claim against the debtor. .. ”.

Section 362(a)(6) stays a creditor’s postpetition setoff of a debtor’s deposited funds to collect a prepetition claim unless the creditor obtains relief from the stay.

Nelson v. First National Bank & Trust Co. (In Re Nelson) · filed 1980-09-25(a)(6)

Absent court-granted relief from the automatic stay First National’s setoff against Nelson’s deposited funds was an act to collect First National’s prepetition claim in violation of the § 362(a)(6) injunction.

Section 362(a)(7) stays a creditor’s right of setoff during the bankruptcy case.

Terry v. Gordon's Jewelry Co. of Virginia (In Re Terry) · filed 1980-12-30(a)(7)

It puts a STOP on all creditors efforts, including the right of setoff. 11 U.S.C. 362(a)(7).

Section 362(a)(6) bars a creditor from applying money received from a debtor toward a debt that arose before the bankruptcy case.

In Re Alexander · filed 1981-05-19(a)(6)

The Chapter 13 petition and plan, filed on January 31, 1980, and setting out the terms under which the debtors, under Court supervision, would repay their creditors, also made Beneficial subject to the automatic stay against any act to recover a claim against the debtors that arose before the commencement of the bankruptcy case and prohibited Beneficial from setting-off monies received from the debtors, directly or indirectly, against any pre-petition debt owed by the debtors. 11 U.S.C. § 362(a)(6).

Section 362(a)(7) stays a creditor’s setoff but does not prohibit the IRS from retaining a tax overpayment pending setoff.

Murry v. Commissioner of Internal Revenue Service (In Re Murry) · filed 1981-07-24(a)(7)

Thus, the drafters intended § 362(a)(7) as a mere stay of a creditor’s enforcement of its setoff rights pending an orderly examination of the debtor’s and creditor’s rights. ... Retaining said amount is not and cannot fairly be construed to be equivalent to the type of action prescribed by § 362 when read in conjunction with 26 U.S.C. § 6402(a).

Section 362(a)(7) permits a bank in a liquidation case to freeze funds subject to a valid setoff claim if it promptly files a complaint seeking relief from the stay.

Third National Bank in Nashville v. Carpenter (In Re Carpenter) · filed 1981-09-28(a)(7)

This court is of the opinion that in a liquidation case the withholding or “freezing” of funds subject to a valid setoff claim does not violate the automatic stay of 11 U.S.C. § 362(a)(7), provided that a complaint seeking relief from the stay is filed promptly thereafter.

Section 362’s automatic stay bars a creditor from setting off a debtor’s bank account against a loan after the bankruptcy filing.

Raanes v. National Bank of South Dakota (In Re Raanes) · filed 1982-01-06(a)(7)

Since Creditor’s action is a setoff within the meaning of 11 U.S.C. § 553, the offset of Debtor’s checking account after the filing date is in violation of the automatic stay.

Section 362(a)(7) bars a creditor from retaining a debtor’s refund to apply it to a prepetition debt; delaying a bookkeeping entry does not avoid the stay.

Mealey v. Department of the Treasury Internal Revenue Service (In Re Mealey) · filed 1982-01-26(a)(7)

An artificial measure, such as a bookkeeping entry, cannot be determinative. To rule otherwise would allow a creditor to circumvent the automatic stay by merely delaying the entry of a setoff in his books.

Section 362(a)(7) bars the IRS from exercising an unexercised prepetition right of setoff after a Chapter 13 petition is filed unless it obtains relief from the stay.

In Re Holcomb · filed 1982-03-12(a)(7)

Thus, IRS possessing a right of setoff prior to the filing of the Chapter 13 petition by the Holcombs, but apparently not having exercised that right prior to such filings (the face of claim No. 16 filed by IRS clearly indicates that the setoff right had not been exercised) is now barred under the provisions of § 362 of the Bankruptcy Code from exercising a right of setoff. IRS has not sought any relief from the operation of that provision of § 362 in this case.

Section 362(a) does not prohibit a secured bank from freezing a debtor’s cash collateral account and refusing to release the funds.

Matter of Gazelle, Inc. · filed 1982-02-04(a)

The refusal of the Bank to release cash collateral by “freezing” the account did not constitute a contempt or violation of 11 U.S.C. § 362(a).

Section 362(a)(7) stays a creditor’s setoff after a bankruptcy petition is filed, but does not reach a setoff completed before filing.

Donato v. Dominion National Bank of Tidewater (In Re Donato) · filed 1982-02-17(a)(7)

The Court finds that the bank accomplished the setoff prior to the filing of the debtors’ petition. Because the setoff occurred prior to the petition, the action was not subject to the automatic stay provisions of § 362.

Section 362(a)(7) stays a creditor’s setoff, and a policy of setoffs that violate the stay can warrant turnover of the funds held by the creditor.

Harris v. United States Government Department of the Treasury Internal Revenue Service (In Re Harris) · filed 1982-04-30(a)(7)

In particular, § 362(a)(7) provides for an automatic stay of the exercise of any right of setoff. ... We conclude that, where a setoff has occurred in violation of the automatic stay and where such setoffs are part of a stated policy, it is appropriate for us to order a turnover of the funds being held by the creditor.

Section 362(a)(7) does not prohibit a bank from freezing a debtor’s deposit account subject to a claimed setoff while awaiting a court’s adequate protection determination, so long as the bank does not apply the funds to its debt.

Kenney's Franchise Corp. v. Central Fidelity Bank NA, Lynchburg · filed 1982-08-24(a)(7)

The Bank has not received adequate protection and, accordingly, does not have to turn over the funds to the debtor without the approval of the court. The Bank’s action in administratively freezing the debtor’s checking account does not constitute a violation of the automatic stay.

Section 362(a)(7) bars a creditor from exercising an otherwise valid setoff of prepetition mutual debts after the bankruptcy filing without court permission.

Massachusetts v. Dartmouth House Nursing Home, Inc. (In Re Dartmouth House Nursing Home, Inc.) · filed 1982-09-30(a)(7)

Although these mutual obligations formed the basis of a proper setoff, it was improper for Welfare to appropriate the “retropayments” on February 5, 1982, after the filing of the petition, without permission of the Court because the exercise of the right of setoff is prohibited by the automatic stay.

Section 362(a)(7) stays a creditor’s setoff, requiring the creditor to obtain relief from the stay under § 362(d) before taking the setoff.

In Re Norton · filed 1982-10-25(a)(7)

In this regard, the non-debtor party seeking to assert a set off must proceed under section 362(d), seeking relief from the automatic stay, before the setoff can be taken.

Section 362 does not bar the government from deducting previously paid military readjustment pay from retirement pay when the earlier payment created no debt.

Dwyer v. United States (In re Dwyer) · filed 1982-12-23

It is the determination of the Court that payment of readjustment pay by the United States does not establish a debtor-creditor relationship between the United States and the recipient, and that therefore the post-petition setoff under 10 U.S.C. § 687(f) of 75% of prior readjustment pay from retirement pay under titles 10 or 14 of the United States Code is not violative of 11 U.S.C. § 362.

Section 362’s automatic stay does not bar the exercise of a protected right to offset prior Medicare overpayments against current reimbursements.

Ambulance Corp. of America v. Schweiker (In Re Ambulance Corp. of America) · filed 1983-03-03(a)(7)

In conclusion, the Court finds that the Defendants are not in violation of the automatic stay.

Section 362(a)(7) requires court permission before a creditor may make a post-petition set-off.

Row Steel, Inc. v. Asphalt & Sealers Equipment Manufacturing (In Re Row Steel, Inc.) · filed 1983-08-24(a)(7)

The post-petition set-off will not be disturbed by the § 553(b) improvement in position test; however, such a set-off can be accomplished only with the Court’s permission, due to the automatic stay of 11 U.S.C. § 362(a)(7).

Section 362(a)(7) does not apply to postpetition transactions, leaving common law setoff and recoupment available for those transactions.

Pickrel v. Professional Housewares Distributors (In re Dixie Enterprises, Inc.) · filed 1983-07-15(a)(7)

Furthermore, 11 U.S.C. §§ 362(a)(7) and 553 are inapplicable to post-petition transactions, and Debtor’s common law rights of setoff and recoupment are thus assertable in this situation.

Section 362(a)(7) bars the IRS from retaining a debtor’s tax overpayment to preserve a setoff against prepetition tax debt without relief from the automatic stay.

United States of America on Behalf of Its Agency Internal Revenue Service v. William H. Norton, Carrie W. Norton, F/k/a · filed 1983-09-12(a)(7)

Shortly after the debtors filed a petition for an adjustment of their debts under the Bankruptcy Reform Act of 1978, hereinafter referred to as the Code, the Internal Revenue Service (IRS) retained a portion of a tax overpayment that was due the debtors. The principal issue before us in this appeal is whether this action by the IRS violated the automatic stay provisions of the Code. We hold that it does.

Section 362 prohibits a bank from setting off a debt owed to the debtor against a prepetition debt after the bankruptcy petition is filed.

LHG Resources, Inc. v. First National Bank of Midland (In Re LHG Resources, Inc.) · filed 1983-10-06(a)(7)

The withdrawal of the funds by the Bank was, therefore, a proscribed post-petition setoff against a pre-petition debt.

Section 362(a)(7) bars a creditor from exercising a setoff without relief from the automatic stay but does not extinguish the substantive right of setoff.

Butz v. Champaign Landmark, Inc. (In Re Bodey) · filed 1983-10-13(a)(7)

The issue now implicit from the facts is the consequence of the violation of the automatic stay provisions of 11 U.S.C. § 362(a)(7), which prevents the exercise of the setoff right without obtaining relief from the stay. ... Inasmuch as the § 362(a)(7) automatic stay does not invalidate the substantive right of setoff, relief therefrom granted by the Court would constitute authorization to assert the secured creditor status.

Section 362(a)(7) delays enforcement of a creditor’s setoff right without extinguishing that right.

Ducker v. Lohrey (In Re Williams) · filed 1983-10-31(a)(7)

Thus, the filing of a debtor’s petition in bankruptcy does not terminate or destroy a creditor’s right of setoff, but merely delays the enforcement of such right.

Section 362 permits a bank claiming a right of setoff to temporarily defer access to a debtor’s deposit account while the parties seek a court determination of their rights.

Bank of America National Trust & Savings Ass'n v. Edgins (In Re Edgins) · filed 1984-01-13

The question presented is, may the bank, a creditor of the debtor, defer withdrawal of funds from debtor’s account without violating the 11 U.S.C. Section 362 stay? We hold that the bank may defer access to the account and accordingly reverse.

Section 362(a)(6) bars the IRS from retaining a Chapter 13 debtor’s tax refund after plan confirmation to collect a prepetition tax claim.

In Re Warden · filed 1984-01-25(a)(6)

By retaining debtors’ 1982 tax refund after the entry of the order confirming debtors’ Chapter 13 plan, the IRS violated 11 U.S.C. Section 362(a)(6).

Section 362(a)(7) bars a postpetition setoff of prepetition claims without bankruptcy court approval.

Bridgeport Co. v. United States Postal Service · filed 1984-02-24(a)(7)

Technically the bank has violated § 362(a)(7) of the Bankruptcy Code which enjoins the post petition set off of pre petition claims except with the approval of the bankruptcy court.

Section 362(a)(7) bars the IRS from retaining a debtor’s prepetition tax refund in a suspense account to offset a prepetition tax debt.

United States v. Reynolds · filed 1984-03-19(a)(7)

In sum, the court finds that the retention of the refund in a “suspense account” amounted to a setoff in violation of the automatic stay.

Section 362(a) permits a creditor with an unexercised right of setoff to place an administrative freeze on a debtor’s account while the bankruptcy court determines the parties’ rights.

Stann v. Mid American Credit Union · filed 1984-04-23(a)

The court finds that the credit union did not violate the automatic stay of 11 U.S.C. § 362(a) by placing an administrative freeze on the debtor’s account.

Section 362(a)(6) bars an agency from withholding postpetition SSI benefits to recover prepetition overpayments when the payments are separate transactions and the withholding is a setoff.

Hagan v. Heckler (In Re Hagan) · filed 1984-06-04(a)(6)

Accordingly, we conclude that SSA’s retention of the debtor’s post-petition benefits constituted a setoff in violation of the automatic stay, 11 U.S.C. § 362, and that sections 1631 and 207 of the Social Security Act do not except from or prevent the discharge of the debt-overpayment in question.

Section 362’s automatic stay does not bar a setoff completed before the bankruptcy petition was filed.

In Re Davis · filed 1984-07-31

Section 553 of the Bankruptcy Code does not preclude, but rather recognizes, prepet-ition setoffs to the extent contemplated by state law, and the automatic stay mandated by 11 U.S.C. § 362 does not preclude a prepetition setoff.

Section 362(a)(7) requires relief from the automatic stay before a creditor may set off prepetition debts after the petition is filed.

Zerodec Mega Corp. v. Terstep of Texas, Inc. (In Re Zerodec Mega Corp.) · filed 1985-03-14(a)(7)

First, the setoff of prepetition debts cannot be effected postpetition without relief from the automatic stay. 11 U.S.C. § 362(a)(7).

Section 362(a)(7) stays a creditor’s retention of a debtor’s tax refund as a setoff, even when the creditor calls the retention a freeze pending later setoff.

United States of America v. Reynolds · filed 1985-06-17(a)(7)

We conclude that under the circumstances of this case the action of the IRS in retaining the Reynoldses' refund was a setoff subject to the automatic stay and that the IRS violated the stay in retaining the funds.

Section 362(a)(7) prevents setoff of prepetition debts after the bankruptcy petition without relief from the automatic stay.

Zerodec Megacorp, Inc. v. Terstep of Texas, Inc. (In Re Zerodec Megacorp, Inc.) · filed 1985-07-10(a)(7)

The distinction between prepetition and postpetition credits is important because as the bankruptcy court correctly noted, “the setoff of prepetition debts cannot be effected postpetition without relief from the automatic stay.” 11 U.S.C. § 362(a)(7).

Section 362(a)(7) stays a credit union’s setoff of dishonored-check charges against a debtor’s account after the bankruptcy petition is filed.

In Re Rio · filed 1985-10-25(a)(7)

This court holds that this activity of the credit union is a setoff and a clear, willful and flagrant violation of § 362(a)(7).

Section 362(a) bars a creditor from deducting postpetition wages to set off a prepetition debt until the automatic stay is lifted.

United States v. Wall (In Re Wall) · filed 1986-02-13(a)

Accordingly, the Army’s action taken in reliance on its right of recoupment is a violation of the automatic stay based on our finding that this was a debt. Therefore, the Army’s deduction was, in fact, the exercise of a right of setoff. As noted in Section 553, such rights are subject to the provisions of the automatic stay and the exercise thereof can only be initiated after the lifting of the stay.

Section 362(a)(7) bars a bank from setting off a debtor’s account against its claim after the bankruptcy petition is filed, including on the filing day.

Mewes v. BankWest of South Dakota (In Re Mewes) · filed 1986-03-05(a)(7)

Because the Court finds that the automatic stay provisions became effective at 8:40 a.m. on April 10, 1985, and that Ban-kWest offset the $16,629.57 in the ranch account against a note after that time, the Court holds that BankWest violated the automatic stay provided by Bankruptcy Code Sections 362(a)(3) and (7).

Section 362(a)(7) bars a creditor from completing a postpetition setoff, but a bank with a valid setoff right may temporarily freeze the debtor’s account pending a court order disposing of the funds.

Williams v. American Bank of the Mid-Cities, N.A. (In Re Williams) · filed 1986-06-10(a)(7)

In summary, Section 542(b) permits a creditor to hold funds subject to a right of setoff in spite of a demand for a turnover. In other words, all provisions of the Bankruptcy Code can be given full effect by construing Section 542(b) as an exception to the general rule in Section 362(a)(7) against post-petition offsets. Section 362(a)(7) simply prohibits the creditor from taking the second step in the three-step process of offset under Texas law.

Section 362(a)(7) restrains a creditor from setting off mutual debts after a bankruptcy case begins unless the creditor obtains relief from the automatic stay.

State Bank of Spring Hill v. Bucyrus Grain Co. (In Re Bucyrus Grain Co.) · filed 1986-11-20(a)(7)

A setoff after the commencement of the case is subject to the restraints of 11 U.S.C. § 362(a)(7). The bank must obtain relief from the automatic stay.

Section 362’s automatic stay bars a creditor from setting off its alleged prepetition claim against amounts owed to the debtor after the petition when the claims do not arise from the same transaction.

Steinberg v. Illinois Department of Mental Health & Developmental Disabilities (In Re Klingberg Schools) · filed 1986-11-25(a)(7)

Therefore, we find that the defendant improperly asserted a set-off, and not a re-coupment, in violation of the automatic stay provisions of 11 U.S.C. § 362.

Section 362 requires a creditor to obtain relief from the automatic stay before asserting a counterclaim arising from a prepetition debt, including a setoff counterclaim.

Lessig Construction, Inc. v. Schnabel Associates, Inc. (In Re Lessig Construction, Inc.) · filed 1986-12-02

As to the procedural issue, we believe that it is prerequisite for the defendant, if he asserts any counterclaim arising from a pre-petition debt including a counterclaim in the nature of a setoff within the scope of 11 U.S.C. § 553, to obtain relief from the automatic stay imposed by 11 U.S.C. § 362 prior to asserting same.

Section 362’s automatic stay prohibits a setoff against the debtor, as distinguished from recoupment.

In Re Klingberg Schools · filed 1988-01-13

We agree with the district court that "the defendant improperly asserted a set-off, and not a recoupment, in violation of the automatic stay provisions of 11 U.S.C. Sec. 362." In re Klingberg Schools, 68 B.R. 173, 180 (N.D.Ill.1986).

Section 362’s automatic stay bars a creditor from asserting a set-off against the debtor.

Steinberg v. Illinois Department of Mental Health & Developmental Disabilities · filed 1988-01-13

We agree with the district court that “the defendant improperly asserted a set-off, and not a recoupment, in violation of the automatic stay provisions of 11 U.S.C. § 362.” In re Klingberg Schools, 68 B.R. 173, 180 (N.D.Ill.1986).

Section 362(a)(7) requires a creditor to obtain relief from the automatic stay before exercising a postpetition right of setoff.

Heckathorn Construction Co. v. Bass Mechanical Contractors, Inc. (In Re Bass Mechanical Contractors, Inc.) · filed 1988-03-23(a)(7)

Set-off, after a bankruptcy filing is limited, however, by the automatic stay provisions of 11 U.S.C. § 362(a)(7). If a creditor does not obtain relief from the automatic stay prior to exercising its right of set-off, a creditor violates the automatic stay provisions.

Section 362(a)(7) requires a bank holding a debtor’s funds subject to later settlements to obtain court approval before setting off those funds after the bankruptcy petition.

Sherman v. First City Bank of Dallas (In Re United Sciences of America, Inc.) · filed 1988-03-25(a)(7)

As the Bank holds the funds subject to settlements, the Bank is bound by 11 U.S.C. § 362(a)(7) ... and 11 U.S.C. § 553(a), and must seek Court approval to accomplish set-off.

Section 362(a)(7) renders a creditor’s post-petition request to set off a debt void when the court does not lift the automatic stay.

Matter of Hazelton · filed 1988-04-11(a)(7)

In the case at bar, however, the court holds that actions taken by FmHA requesting that ASCS-CCC setoff the amount due on the 1986 Contract in October 1987 are void ab initio and that the ASCS-CCC debt which matured in October 1987 is due and payable to the debtor in possession.

Section 362(a)(7) stays a creditor’s attempted setoff until the creditor obtains relief from the automatic stay.

United States Ex Rel. Small Business Administration v. Rinehart · filed 1988-08-10(a)(7)

In addition, setoff rights are stayed by 11 U.S.C. § 362(a)(7). ... Because the findings of the Bankruptcy Court that the actions of the SBA constituted an attempt to effect a setoff are not clearly erroneous, the Court affirms the decision of the Bankruptcy Court that the SBA violated the automatic stay.

Section 362(a)(7) bars a creditor from setting off a prepetition debt against the debtor’s postpetition earnings without obtaining relief from the stay.

Soiett v. United States of America Veterans' Administration · filed 1988-10-14(a)(7)

The record in this case shows the V.A. continued to violate the automatic stay. Had the V.A. any legal basis for collecting a pre-filing debt against a post-filing asset of the debtor, it could have and should have petitioned the Court for relief from the stay to proceed on its claim.

Section 362(a)(7) stays the exercise of an otherwise valid setoff until the creditor obtains relief from the stay.

Lubman v. Sovran Bank, N.A. (In Re a & B Homes, Ltd.) · filed 1989-03-24(a)(7)

Thus, the holders of valid setoffs may not execute them without obtaining relief from the automatic stay.

Section 362(a)(7) prohibits a creditor from taking a setoff without first obtaining relief from the automatic stay.

Charter Crude Oil Co. v. Exxon Co., U.S.A. (In Re Charter Co.) · filed 1989-04-20(a)(7)

Section 362(a)(7) of the Code specifically prohibits a creditor from taking a setoff without first obtaining relief from the automatic stay. A setoff taken without court approval constitutes a violation of the automatic stay.

Section 362(b)(7) excepts a repo participant’s setoff of a settlement-payment claim arising from a repurchase agreement from the automatic stay when the dealer was obligated to deliver securities to safekeeping.

Cohen v. Savings Building & Loan Co. (In re Bevill, Bresler & Schulman Asset Management Corp.) · filed 1990-02-22(b)(7)

We hold that AMC’s obligation to deliver the GNMAs to safekeeping was an obligation to make a settlement payment; that, therefore, Savings’ claim is a claim for a settlement payment arising out of a repurchase agreement, within the meaning of 11 U.S.C. § 362(b)(7). The automatic stay, therefore, does not prevent Savings from exercising a right of setoff.

Section 362(a)(3) and (a)(6) generally permit a creditor to withhold payment of disputed funds while preserving the status quo pending a judicial determination of setoff.

Dicello v. Boston & Maine Corp. (In Re Delaware & Hudson Railway Co.) · filed 1991-05-07(a)(3), (a)(6)

Such a freeze is usually not deemed to be an “act to obtain possession of property” or an “act to collect ... or recover a claim against the debtor” as prohibited by § 362(a)(3) and (a)(6), respectively.

Section 362(a)(7) bars a creditor from exercising setoff rights under § 553 until relief from the automatic stay is granted.

Express Freight Lines, Inc. v. Kelly (In Re Express Freight Lines, Inc.) · filed 1991-07-15(a)(7)

Per 11 U.S.C. § 362(a)(7), a creditor is expressly prohibited from applying setoff rights under § 553 unless relief from the automatic stay is granted.

Section 362(a) bars a creditor from asserting claims or seeking setoffs against the debtor outside bankruptcy court.

Pan American World Airways, Inc. v. Evergreen International Airlines, Inc. · filed 1991-09-10(a)

However, allowing the suit to proceed in this Court would actually fractionalize the proceedings and waste judicial resources, because the automatic stay provision of 11 U.S.C. § 362(a) bars Evergreen from raising its claims or seeking setoffs in any forum except the bankruptcy court.

Section 362(a)(7) prohibits a creditor from taking a postpetition setoff without first obtaining relief from the automatic stay.

Blava In-Line, Inc. v. Midlantic National Bank/North (In Re Blava In-Line, Inc.) · filed 1991-10-28(a)(7)

Section 362(a)(7) of the Bankruptcy Code specifically prohibits a creditor, such as Midlantic, from taking a setoff without first obtaining relief from the automatic stay. A setoff taken without court approval constitutes a violation of the automatic stay.

Section 362(a)(7) makes a postpetition setoff violating the automatic stay void even when the creditor lacked notice of the bankruptcy.

In Re Miel · filed 1991-12-05(a)(7)

The fact that the IRS was not aware of the Debtor’s filing does not save their setoff on June 10, 1991 from violating § 362(a). By violating the stay, the setoff of the Debtor’s refund is rendered void.

Section 362(a)(7)’s automatic stay does not govern setoff after an involuntary bankruptcy case is dismissed.

In Re K.P. Enterprise · filed 1992-01-02(a)(7)

Setoff, were it to occur at all, would necessarily be invoked after dismissal, where neither § 362 nor § 553 holds sway.

Section 362’s automatic stay bars a creditor from setting off a postpetition debt it owes the debtor against rent that accrued before the petition, even when the rent became payable afterward.

Loethen Oil Co. v. Hen House Interstate, Inc. (In Re Hen House Interstate, Inc.) · filed 1992-01-28

Having determined that the quarterly rent Hen House owed to Loethen can be separated into a pre-petition and post-petition component, this court holds that Loethen Oil Co.’s attempt to set-off a post-petition debt it owed the Debtor against that pre-petition debt constituted a violation of Section 362’s automatic stay.

Section 362(a)(7) stays counterclaims seeking to set off a prepetition debt owed to the debtor against a claim against the debtor.

Drexel Burnham Lambert Inc. v. Terex Corp. · filed 1992-06-16(a)(7)

The IAS court properly held the assertion and prosecution of such counterclaims to be subject to the automatic bankruptcy stay of 11 USC § 362 (a) (7) applicable to "the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor”.

Section 362(a)(7) bars a creditor from effectively setting off a debtor’s prepetition debt through a postpetition transfer between loan accounts; even a technical violation must be reversed.

Falcone v. Prosperity Bank & Trust (In re Falcone) · filed 1992-06-23(a)(7)

It is nevertheless clear that the bank’s effective setoff was at least a technical violation of the automatic stay and must be retracted. Accordingly, debtors’ motion for summary judgment on this issue will be granted.

Section 362(a)(7) stays setoff, but a creditor may assert setoff as a defense to a trustee’s turnover demand without violating the stay.

Matter of Corland Corp. · filed 1992-08-05(a)(7)

We conclude that Stephenson properly asserted setoff in response to the Trustee's demand on the Stephenson Note, without violating the automatic stay.

Section 362(a)(7) stays a creditor’s setoff of a debt it owes the debtor against its claim against the debtor.

In Re Anton · filed 1992-10-16(a)(7)

The setoff by a creditor of a debt owed by it to the debtor against its claim against the debtor is explicitly stayed by 11 U.S.C. § 362(a)(7).

Section 362(a)(7) prohibits a creditor from exercising a post-petition right of setoff.

Hunter v. Society Bank & Trust (In Re Parker Steel Co.) · filed 1992-12-10(a)(7)

Additionally, defendant’s post-petition right to setoff is prohibited by 11 U.S.C. § 362(a)(7).

Section 362(a)(7) stays a creditor’s postpetition offset of a debtor’s prepetition debt when the competing obligations arise from different transactions.

In re Freigo · filed 1992-12-28(a)(7)

Since the right to the two benefits arise from different transactions, the claims are being offset against one another, rather than recouped. Section 362(a)(7) stays any act to offset a pre-petition debt of the debtor. Therefore, by offsetting the workers’ compensation benefits against the disability payments, the City violated the automatic stay.

Section 362(a)(7) requires a creditor to obtain relief from the automatic stay before exercising setoff rights.

Andrews v. Hall (In Re Andrews) · filed 1993-03-31(a)(7)

However, Tarmac will be required to obtain relief from the automatic stay in order to exercise its set off rights pursuant to 11 U.S.C. § 553(a). See 11 U.S.C. § 362(a)(7).

Section 362(a)(7) automatically stays setoff of a debt owed to the debtor that arose before the bankruptcy petition.

Beeche Systems Corp. v. D.A. Elia Construction Corp. (In Re Beeche Systems Corp.) · filed 1994-01-24(a)(7)

Since Elia’s debt to Beeche was pre-petition, the filing of Beeche’s petition of bankruptcy resulted in an automatic stay of the set-off of the debt, thereby depriving Elia of the right of set-off.

Section 362(a)(7) bars a creditor from setting off a prepetition debt by deducting an amount owed to the debtor from its proof of claim without obtaining relief from the automatic stay.

Shugrue v. Fischer (In Re Ionosphere Clubs, Inc.) · filed 1994-02-18(a)(7)

In addition, the Government’s actions have also violated the automatic stay provisions of § 362(a)(7) of the Code. ... In contravention of this section, the GSA filed a Proof of Claim in Eastern’s bankruptcy which subtracted the GSA Payable from the amount allegedly owed by Eastern to the GSA and stated that the “net amount” owed to the United States was $1,524,844.96. Although the Government subsequently amended its proof of claim, this action clearly evidences a decision to exercise the right of setoff without obtaining relief from the automatic stay.

Section 362(a)(7) bars a creditor from withholding money owed to the debtor as a postpetition setoff.

Official Committee of Unsecured Creditors of Operation Open City v. New York State Department (In Re Operation Open City · filed 1994-08-22(a)(7)

By withholding money when making full and final payment to the debtor, by way of the setoff, the State ran afoul of § 362(a)(7) of the Bankruptcy Code.

Section 362(a)(7) prohibits a creditor from withholding money owed to a debtor to offset its claim after the bankruptcy petition is filed without court approval.

Winchester v. Commodity Credit Corp. (In Re Winchester) · filed 1995-01-23(a)(7)

The court is of the opinion that the defendants willfully violated 11 U.S.C. § 362(a)(7) when they caused the $6,449.00, owed to Mr. Winchester on the 1988 soybean disaster entitlement, to be withheld. This was done subsequent to the filing of the Chapter 12 petition and clearly without the approval of the court.

Section 362(a)(7) stays setoff only when the debt owed to the debtor arose before the bankruptcy case was filed.

In Re Davidson Lumber Sales, Inc., Debtor. Zions First National Bank, N.A. v. Christiansen Brothers, Inc., and Jacobsen- · filed 1995-09-19(a)(7)

The automatic stay section deals with setoff specifically, but it is likewise addressed only to a debt owed the debtor that arose before the case was filed.

Section 362(a)(7) stays the setoff of a prepetition debt owed to the debtor against a claim against the debtor.

In Re Lawson · filed 1995-09-26(a)(7)

The setoff of any prepetition debt owing to the debtor is a violation of the automatic stay.

Section 362 requires a creditor to obtain relief from the automatic stay before setting off debts after a bankruptcy filing.

First Union National Bank of Florida v. Abbey Financial Corp. (In Re Abbey Financial Corp.) · filed 1996-02-29(a)(7)

A party wishing to setoff after the filing must therefore first seek and receive relief from the automatic stay. First Union did not do that and therefore violated the stay.

Section 362(a) entitles the bankruptcy estate to turnover of credit card invoices when recoupment does not apply, subject to the creditor’s right of setoff under § 553.

Conoco, Inc. v. Styler · filed 1996-04-30(a)

Because Peterson’s assignments of the credit card invoices were not part of the same transaction as Conoco’s sale of products, the doctrine of recoupment does not apply. Peterson’s bankruptcy estate is entitled to the turnover of the $69,370.49 in credit card invoices pursuant to the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362(a), subject to Conoco’s right to setoff under 11 U.S.C. § 553.

Section 362(a)(7) bars creditors, including the IRS, from offsetting debts after a bankruptcy filing without bankruptcy court permission.

In Re Chateaugay Corporation · filed 1996-08-30(a)(7)

When the LTV Corporation filed for bankruptcy, all of its creditors were prohibited (by operation of bankruptcy's automatic stay provision, 11 U.S.C. § 362(a)(7)) from offsetting any debt owed to them without permission of the bankruptcy court, in accordance with the Code.

Section 362 stays setoff of a prepetition unemployment-benefit overpayment against benefits owed on a separate postpetition claim; recoupment is outside the stay only when the debts arise from the same transaction.

In Re: Diane Malinowski and Stanley Malinowski, Debtor Diane Malinowski and Stanley Malinowski v. New York State Departm · filed 1998-08-19

The distinction between set-off and recoupment is crucial because set-off claims are subject to the automatic stay of 11 U.S.C. § 362 and are substantively limited by the Bankruptcy Code, 11 U.S.C. § 553 (1994). ... When the circumstances that gave rise to the credit and those giving rise to the creditor’s obligation to the debtor do not result from a set of reciprocal contractual obligations or from the same set of facts, they are not part of the same transaction. In this case, the two claims for unemployment benefits were based upon different episodes of unemployment.

Section 362(a) is violated when a creditor causes its prepetition student-loan claim to be set off against the debtor’s postpetition tax refund.

Blake v. U.S. Department of Education Internal Revenue Service (In Re Blake) · filed 1998-10-30(a)

It is clear that it has caused the setoff of a prepetition obligation owing it on account of a student loan against a postpetition obligation arising in favor of the debtor — her interest in her tax refund for the return filed for the year 1997. ... The court finds that the Department of Education has violated the stay of 11 U.S.C. § 362(a) by causing the setoff by the Internal Revenue Service.

Section 362’s automatic stay protects estate rights in a tax overpayment, and a post-petition setoff against pre-petition tax debt violates it.

Goldman v. United States (In re Schield) · filed 1999-08-13

Because the Debtor had rights in the overpayment that became property of the bankruptcy estate on commencement of the case, those rights were protected by the automatic stay of 11 U.S.C. § 362. The IRS’s post-petition setoff of the overpayment against a pre-petition debt violated the automatic stay.

Section 362(a)(7) subjects a creditor’s prepetition setoff right to the automatic stay once a bankruptcy petition is filed.

Norfolk Shipbuilding & Drydock Corp. v. Carlyle (In Re Carlyle) · filed 1999-12-17(a)(7)

While section 553 of the Bankruptcy Code preserves the right of setoff as it may exist prepetition, once a bankruptcy petition is filed, a creditor’s right of setoff is subject to the automatic stay.

Section 362(a)(7) stays enforcement of a creditor’s setoff right until the stay ends upon discharge, without extinguishing that right.

In re Ketelsen · filed 2001-01-16(a)(7)

Section 362(a)(7) is the automatic stay provision pertaining to offsets while § 363 provides that the trustee’s right to use property of the estate is subject to a right of setoff. ... Because the stay is lifted upon the granting of the discharge, ... it would appear that the “orderly examination” has been completed and that enforcement of a creditor’s offset right is available upon discharge.

Section 362(a)(7) requires a creditor to obtain court approval before offsetting its claim against a debt it owes the debtor.

Official Committee of Unsecured Creditors of High Strength Steel, Inc. Ex Rel. Estate of High Strength Steel, Inc. v. Lo · filed 2001-08-02(a)(7)

Therefore, a creditor cannot unilaterally offset its claim against the claim of a debtor without first obtaining court approval.

Section 362(a)(7) prohibits a creditor from exercising a setoff after the bankruptcy filing and requires it to vacate a setoff made in violation of the stay.

In Re GeneSys, Inc. · filed 2001-10-26(a)(7)

To bring the stay violation to the Air Force’s attention required no more than sending a simple two-sentence letter saying (1) the Air Force violated § 362(a)(7) by exercising its right of setoff, and (2) the Air Force was required to vacate the exercise of the right of setoff.

Section 362(a)(7) requires a setoff claim against a party in bankruptcy to be considered in the bankruptcy proceeding, rather than in the state court action.

Neuman Distributors, Inc. v. Falak Pharmacy Corp. · filed 2001-12-10(a)(7)

At this juncture, the defendant’s claim for setoffs can only be considered as part of the plaintiffs bankruptcy proceeding pending in Federal Bankruptcy Court and not in the Supreme Court (see, 11 USC § 362 [a] [7]; Drexel Burnham Lambert v Terex Corp., 184 AD2d 328).

Section 362(a)(7) requires a claim for setoff against a bankrupt plaintiff to be considered in the plaintiff’s bankruptcy proceeding.

Becker v. Shore Drugs, Inc. · filed 2002-07-22(a)(7)

In any event, the defendant’s claim for credit is a actually a claim for a setoff, which can only be considered as part of the plaintiff’s bankruptcy proceeding pending in Federal Bankruptcy Court (see 11 USC § 362 [a] [7]; Matter of Malinowski, 156 F3d 131; Neuman Distribs. v Falak Pharmacy Corp., supra; Drexel Burnham Lambert v Terex Corp., 184 AD2d 328, 329).

Section 362 prevents a creditor from immediately setting off a debtor’s bank accounts against its debt, but the creditor may petition the bankruptcy court for relief from the stay.

Stumpf v. Hibernia National Bank · filed 2003-04-29

Although the automatic stay provision of 11 USC § 362 prevented defendant from immediately utilizing SDI accounts to offset its debt, defendant could have obtained relief from the stay by petition to the court.

Section 362(a)(7) bars postpetition credit card chargebacks and penalties when they constitute setoffs rather than recoupment.

Leonard v. Optimal Payments Ltd. (In Re National Audit Defense Network) · filed 2005-06-23(a)(7)

To the extent that Optimal relies on United Sciences and its setoff theory, then each postpetition transaction — that is, each chargeback or penalty assessed — was a setoff and violated the automatic stay. 11 U.S.C. § 362(a)(7).

A violation of the automatic stay in exercising a setoff does not invalidate the underlying right of setoff.

In Re Blagg · filed 2007-05-08

Although the exercise may have violated the stay, the consequence would not be invalidation of the right of offset.

Section 362(a)(7) bars a creditor from exercising a setoff after the bankruptcy filing without first obtaining relief from the stay under § 362(d).

General Motors Acceptance Corp. v. Midway Motor Sales, Inc. (In re Midway Motor Sales, Inc.) · filed 2008-12-11(a)(7), (d)

After imposition of the automatic stay, a creditor must move for and be granted relief from stay under § 362(d) to exercise a valid setoff. Flynn violated the automatic stay in § 362(a)(7) by taking a setoff without permission of the Court.

Section 362 prohibits unilateral withholding of pension benefits to offset a prepetition debt, and a willful violation requires awareness of the bankruptcy proceeding rather than specific intent to violate the stay.

In Re Radcliffe · filed 2009-04-23(a)(6), (h)

Furthermore, the Fund’s letter to Radcliffe is in violation of § 362(a)(6). As the district court correctly noted, the Fund held all the cards. Without seeking court approval, it simply made a unilateral decision not to pay the pension benefits. It informed Radcliffe that it did not need court approval because it did not believe the bankruptcy law applied to it. We discern no abuse of discretion in the decision that the Fund violated the automatic stay. ... A willful violation does not require specific intent to violate the stay; it is sufficient that the creditor takes questionable action despite the awareness of a pending bankruptcy proceeding.

Section 362(a)(7) stays a creditor from exercising a prepetition setoff right, even though bankruptcy law preserves that right.

Szymanski v. Wachovia Bank, N.A. (In Re Szymanski) · filed 2009-08-12(a)(7)

Although a prepetition right of set-off is preserved under the Bankruptcy Code by section 553(a), the exercise of that right is enjoined by the bankruptcy stay.

Section 362(a)(7) prevents a landlord from setting off a lease security deposit against unpaid rent unless the landlord obtains relief from the automatic stay.

In Re Sweet N Sour 7th Ave. Corp. · filed 2010-06-18(a)(7)

As a result, the automatic stay remains in force preventing the Landlord from exercising any right to setoff with respect to the Deposit. The Landlord will have to file a motion to lift the stay before it can exercise any right of setoff.

Section 362(a)(3) and (a)(6) do not prohibit the IRS from freezing automated tax refund processing or taking related steps to preserve a refund while seeking to modify a Chapter 13 plan.

Harchar v. United States · filed 2010-08-18(a)(3), (a)(6)

Bankruptcy Judge Speer issued a very thorough opinion addressing whether the stay was violated, holding that neither the institution of the freeze nor the actions of the IRS in connection with the freeze constituted a violation of 11 U.S.C. § 362(a)(3) or 362(a)(6). ... After reviewing that opinion and its legal conclusions de novo in light of the current arguments on appeal, this Court adopts that opinion in its entirety, and affirms the bankruptcy court’s decision to grant the Government summary judgment on the stay violation claim.

Section 362(a)(3) does not bar a bank from freezing a chapter 7 debtor’s account while awaiting the trustee’s instructions when the account is estate property and the debtor cannot direct its disposition.

In Re Young · filed 2010-09-28(a)(3)

It was merely a refusal to perform its promise to pay to the Debtor who had absolutely no authority to direct disposition of estate property after the case was filed. Thus, this refusal could in no way give rise to a violation of section 362(a)(3).

Section 362(a)(3) does not prohibit a bank from temporarily holding estate bank accounts while promptly seeking the trustee’s instructions, because that preserves the status quo rather than exercising control over estate property.

In Re Phillips · filed 2010-10-05(a)(3)

Wells Fargo’s administrative hold was temporary refusal to pay the Debtors rather than the Trustee which served to both maintain the status quo and preserve property of the estate for the Trustee. As such, Wells Fargo’s actions did not constitute an exercise of control in violation of § 362(a)(3).

Section 362(a)(7) permits a creditor to freeze an account temporarily to preserve setoff rights only if it promptly seeks relief from the stay and limits the freeze to the time needed for the court to act.

Turner v. First Community Credit Union · filed 2011-07-11(a)(7)

Stated differently, First Community ignored the Strumpf requirement that a creditor shall promptly file a motion for relief from the automatic stay and only apply the freeze so long as it takes the bankruptcy court to grant the appropriate relief requested.

Section 362(a)(7) prevents a creditor from setting off funds on deposit until it obtains relief from the automatic stay.

Citibank (New York State), N.A. v. Interfirst Bank of Wichita Falls, N.A. F/k/a City National Bank in Wichita Falls · filed 1986-03-10(a)(7)

Interfirst had no right to setoff funds on deposit until it petitioned the bankruptcy court and received relief from the automatic stay on September 22, 1984.

Section 362(a)(7) prohibits a creditor from making a postpetition setoff without relief from the automatic stay; retaining funds can constitute a prohibited setoff.

In Re Midway Industrial Contractors, Inc. · filed 1994-04-15(a)(7)

Therefore, the IRS’s retention of the Debtor’s overpayment is deemed to have constituted an automatic setoff and was in violation of the automatic stay.

Section 362(a) does not bar a non-party from defending a lawsuit brought against it.

Savage & Associates, P.C. Ex Rel. Teligent, Inc. v. Mandl (In Re Teligent, Inc.) · filed 2011-10-03(a)

A non-party does not violate the automatic stay by defending a lawsuit brought against it.

Section 362(a)(3) does not bar a defendant from asserting an affirmative defense in a trustee’s adversary proceeding or freeze the substantive law governing that proceeding as of the petition date.

De'Medici v. FDSI Management Group (In Re Lifschultz Fast Freight Corp.) · filed 1994-10-26(a)(3)

However, the stay does not prohibit a defendant from asserting an affirmative defense in a bankruptcy trustee’s adversary proceeding. Nor does the stay “freeze,” as of the date of the bankruptcy petition, the substantive law applying to such an adversary proceeding. Accordingly, the automatic stay does not prohibit the retroactive application of the NRA, and the Trustee’s argument fails.

Section 362(a) does not bar a party from objecting defensively to a proof of claim filed by a debtor.

Justus v. Financial News Network Inc. (In Re Financial News Network Inc.) · filed 1993-07-23(a)

In sum, both the language and purpose of section 362 indicate that the automatic stay in effect in the Bankruptcy Court for the Southern District of California did not preclude the New York Bankruptcy Court from sustaining FNN’s objection to Kaypro’s proof of claim filed in New York Bankruptcy Court.

Section 362(a)(1), (3), and (6) does not stay a taxing authority from moving to dismiss a tax challenge brought by the debtor when the authority acts only to defend itself.

Arizona Public Service Co. v. Apache County · filed 1993-08-04(a)(1), (3), and (6)

The bankruptcy code, 11 U.S.C. § 362(a)(1), (3) and (6), does not prevent a state (or county) to whom property taxes are owed from filing a motion to dismiss a suit filed by the bankrupt taxpayer to declare the taxes illegally assessed.

Section 362 stays suits and claims against a bankruptcy debtor, but does not stay claims brought on the debtor’s behalf.

MacGregor v. Rich · filed 1997-04-18

An automatic stay under federal law applies to suits and claims brought against a bankruptcy debtor, but not to claims brought on the debtor's behalf.

Section 362(a)(3) does not stay a defensive objection to a debtor’s proof of claim when the objection seeks no affirmative relief.

In Re Metiom, Inc. · filed 2003-12-01(a)(3)

However, this provision of section 362(a)(3) does not apply, either, because the Trustee merely is proceeding defensively — not asserting a counterclaim — in objecting to the Claim. The Trustee is not exercising control over divine’s property but, rather, simply is responding to a proof of claim filed in Metiom’s chapter 11 case. Neither the language nor the policy of section 362(a)(3) apply in that context.

Section 362 does not stay a debtor’s affirmative claims against other parties.

Miller v. Shattil · filed 2024-03-05

As an initial matter, the debtor’s affirmative claims against GengisComm and Shattil were never subject to the Bankruptcy Code’s automatic stay.

Section 362(a) does not bar a court from resolving a motion to dismiss the debtor’s affirmative claims against defendants.

Haldane · filed 2026-03-17(a)

Plaintiff contends that the automatic stay does not apply to Defendants’ motion to dismiss because the motion addresses Plaintiffs’ affirmative claims against Defendants. (D.I. 164 at 2) Consequently, the court may resolve Defendants’ motion to dismiss without running afoul of 11 U.S.C. § 362(a).

Section 362(b)(3) narrowly excepts acts to perfect or maintain a lien from the automatic stay; passive possession alone does not qualify.

In re Fulton · filed 2018-06-05(b)(3)

Conversely, 11 U.S.C. § 362(b)(3) is simply a narrow exception to the automatic stay allowing a creditor to perfect or maintain perfection of its lien by some "act" (not "act or omission") during the pendency of a bankruptcy case.

Section 362(b)(3) excepts an act to perfect an interest in property from the automatic stay when the applicable perfection law satisfies Section 546(b).

Mujica v. FirstBank Puerto Rico (In Re Perez Mujica) · filed 2011-09-08(b)(3)

To qualify for this particular exception to the automatic stay, a creditor must satisfy the following three (3) requirements: (i) an act to perfect; (ii) an interest in property; and (3) under the circumstances in which the perfection-authorizing statute fits within the parameters of Section 546(b) of the Bankruptcy Code.

Section 362(b)(3) permits perfection of a prepetition property interest, but does not exempt postpetition lien efforts when the creditor had only a debt and no interest in the debtor’s property before filing.

Reedsburg Utility Commission v. Grede Foundries, Inc. (In Re Grede Foundries, Inc.) · filed 2011-07-13(b)(3)

Thus, because Reedsburg did not have a prepetition interest in Grede’s property, the § 362(b)(3) exception did not apply to Reedsburg’s actions.

Section 362(b)(3) permits, but does not require, a creditor to take an action covered by its exception for perfecting or maintaining an interest in property.

Shamus Holdings, LLC v. LBM Financial, LLC (In Re Shamus Holdings, LLC) · filed 2011-06-09(b)(3)

Neither the case law nor the language of section 362(b)(3) itself suggests that the action it contemplates is mandatory rather than permissive. It clearly is not.

Section 362(b)(3) does not except a creditor’s state-court enforcement motion from the automatic stay when the creditor has no interest in the debtor’s property to perfect or maintain.

In re Murphy · filed 2011-04-05(b)(3)

The Court also must reject Ms. Milbrand’s argument that her state court motion is covered by 11 U.S.C. § 362(b)(3). Ms. Milbrand’s filing of her state court motion was not an “act to perfect, or to maintain or continue the perfection of, an interest in property ...” within the meaning of § 362(b)(3). Ms. Milbrand had no “interest in [any] property” of the Debtor, Thomas Murphy before Mr. Murphy filed bankruptcy or when Ms. Milbrand filed her state court motion.

Section 362(b)(3) permits maintaining perfection of a statutory property tax lien, but does not exempt payment demands or other tax collection from the automatic stay.

Gaff v. Town of Pembroke (In Re Doolan) · filed 2011-03-14(b)(3)

The Court agrees with the NHTCA that Congress has clearly affirmed the exception to the automatic stay which permits the perfection and the continuation of perfection of statutory liens for the collection of both prepetition and postpetition real estate taxes. However, the exception is expressly limited to the perfection or the continuation of perfection of the statutory lien, not demands for payment or other attempts to collect the tax.

Section 362(b)(3) permits postpetition perfection of a lien on estate property when applicable nonbankruptcy law makes the perfected lien effective against previously acquired interests.

Holbrook v. Country Mutual Insurance (In Re Burnett) · filed 2011-01-31(b)(3)

11 U.S.C. §§ 362(b)(3) and 546(b) allow post-petition perfection of liens and interests in property of the debtor or the estate if applicable non-bankruptcy law provides for the perfected lien to be effective against previously acquired interests in such property.

Section 362(b)(3) permits postpetition lien perfection only when applicable law makes perfection effective as of an earlier date; a lien’s superpriority alone does not qualify for the exception.

Peltz v. Wisconsin Department of Workforce Development · filed 2002-06-11(b)(3)

The Wage Lien Statute does not allow perfection to be effective as of a specific date earlier than the actual date of perfection outlined therein. Accordingly, the Department’s actions pursuant to the Wage Lien Statute are not excepted from the automatic stay provision of the Bankruptcy Code.

Section 362(b)(3) permits postpetition perfection or maintenance of an interest the creditor held when bankruptcy was filed; it does not exempt creation of a new lien against estate property.

Louisville & Jefferson County Metropolitan Sewer District v. Excel Engineering, Inc. (In Re Excel Engineering, Inc.) · filed 1998-04-10(b)(3)

Thus, this section applies to actions to perfect, maintain or continue perfection of an interest in property which the creditor had at the time the bankruptcy was filed. ... Thus, Job Rentals did not have an interest at the time Excel commenced its bankruptcy action, as it did not file its Statement of Lien until six days post-petition and delivered it to MSD thereafter.

Section 362(a)(4) bars recording an abstract of judgment after a bankruptcy petition to perfect a judgment lien against estate property.

In Re Warren · filed 1997-12-15(a)(4)

The automatic stay applies to an action to an act to create, perfect, or enforce any lien against property of the estate. 11 U.S.C. § 362(a)(4). ... The court concludes that the perfection of Ellis’ judgment lien by recordation of the abstract of judgment was barred by the automatic stay.