The Automatic Stay and Criminal Prosecution

A very interesting case has come down out of the Bankruptcy Court for the District of Massachusetts. It is Bartel v. Walsh, et al (in re: Bartel); Adv. No. 06-1161. The opinion is dated October 10, 2008 — so, this is nothing if not timely.

The main issue in Bartel is whether or not the exception from the automatic stay for criminal prosecution is absolute. Basically, the Debtor in Bartel argued that this exemption should not apply if the actual motive behind the criminal prosecution was to collect a debt. In support of his argument the Debtor argued provisions from the Federal Civil Rights Act, the Massachusetts Civil Rights Act, the 13th Amendment to the U.S. Constitution and abuse of process. Personally, I thought that the 13th Amendment Argument was downright inspired.

The Debtor in Bartel was a general contractor, and there are sufficient differences between Massachusetts and Oklahoma law regarding general contractors and client funds that I don’t expect to ever see a case just like this one. (Although, for a similar set of facts, but very different law, where I got my butt kicked at the Oklahoma Supreme Court see, In re: Harris, 2002 OK 35, 49 P.3d 710.)

Where I see this kind of issue is with hot checks. I have always told my clients, as this case supports, that a bankruptcy filing discharges the civil liability for hot checks; it does not discharge the criminal liability. In other words, the merchant to whom they wrote the checks can’t sue them; but the D.A. can still put them in jail. On the other hand, I have never actually seen a case where a D.A. has brought a bogus check charge after a Bankruptcy filing. In some cases the reason for that is the restrictions in Oklahoma Statute on what actually constitutes a bogus check — but not all cases.

To my mind the really interesting part of this case is the non-bankruptcy aspect. I will be interested to see if the Debtor pursues some kind of abuse of power or civil rights action against the prosecuting attorney.

Debtor is fortunate to be represented by one of the most dedicated and creative counsel out there. It will be interesting to see how this plays out.


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