Article Discusses Appellate Proceedings and the Automatic Stay

The bankruptcy stay stops all collection actions including court cases in which the debtor is being sued. If a bankruptcy debtor is a party to a state civil case where a judgment has been entered and the case is being appealed, does the bankruptcy stay stop the appeal? This question is the subject of a recent article in the Florida Bar Journal.

The bankruptcy stay does not stop all appeals in which the debtor is a party. The article explain that in cases where a debtor files an action to recover a claim against a third party, and regardless of whether the debtor wins or loses in state court, then the appeal by either party continues notwithstanding the debtor’s bankruptcy filing. But, when a third party has sued the debtor, regardless of whether the debtor wins or loses, the bankruptcy stay stops any appeal. In other words, the debtor’s status of appellant or appellee does not determine the effect of the bankruptcy stay. What is more important is whether the debtor has sued someone or whether someone has sued the debtor.

People involved in an appellate case should understand the consequences of their filing bankruptcy on the appeal. If the debtor is appealing an adverse judgment, the debtor should know that his filing bankruptcy will stop his effort to overturn the judgment on appeal.

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