Bankruptcy Practice Update

New York Bankruptcy Court Restricts Scope of Automatic Stay in Chapter 15 Cases: On August 23, 2010, the Bankruptcy Court for the Southern District of New York held that in an ancillary proceeding commenced under chapter 15 of the Bankruptcy Code, the automatic stay of actions against a debtor and its property applies only to proceedings in the United States unless the foreign proceeding to be stayed would affect property in the United States. See In re JSC BTA Bank, No. 10-10638 (JMP) (Bankr. S.D.N.Y. Aug. 23, 2010) [Docket No. 34].

Typically, the filing of a bankruptcy case under the United States Bankruptcy Code results in the application of an “automatic stay” under section 362 of, among other things, actions against the debtor and its property. Case law considering the extraterritorial application of the stay generally holds that it applies to any proceeding worldwide that would affect the debtor or the debtor?s assets, irrespective of the location of the assets or the proceeding.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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