10 Oct Criminal Prosecution Exception to Stay Ruled Absolute
Judge Rosenthal of the Massachusetts Bankruptcy Court today ruled against a debtor seeking redress for alleged violations of the automatic stay that occurred in the course of a criminal prosecution for larceny.
The debtor was a contractor who allegedly did not perform certain work for which he allegedly was paid. After the bankruptcy case was commenced, state prosecutors seized the debtor’s financial records and proceeded with the larceny prosecution which was motivated, at least in part, by a desire to recover money owed via restitution.
The debtor alleged that the seizure of the records prevented him from proceeding in his bankruptcy case and that the prosecution, designed to collect a pre-petition debt, should be barred by the stay. The debtor was subsequently convicted in state court of some of the counts of the indictment.
The bankruptcy court held that the exception to the automatic stay for criminal prosecutions, found in 11 U.S.C. § 362(b)(1), was absolute and applied even in prosecutions that had an explicit debt collection purpose. The debtor, represented by David Baker, plans to appeal the decision.
Nicholas Ortiz, Boston Bankruptcy Attorney
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