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14
Apr
2022

Voluntary Payments: Automatic Stay Violation

Here, the Chapter 7 Debtor made voluntary payments to creditor after debtor’s filing for bankruptcy. Both debtor and creditor agreed that the post-petition payments would be applied to prepetition debts owed to the creditor. The debtor made more than $39,000 of voluntary payments to creditor.
 
Some two years after the voluntary payments were made, the bankruptcy Trustee filed an action against the creditor to recover the voluntary payments, arguing that the creditor violated the bankruptcy court’s automatic stay by merely accepting the voluntary payments.
 
The court held that the creditor merely accepting voluntary payments constituted a violation of the automatic stay. The creditor was ordered to return the payments to the Trustee for disbursement to other creditors.  Alexander Knopfler v. The Glidden Company, 149 B.R. 517.

EDITOR’S COMMENT

Credit Unions often are confronted with bankrupt members who desire to voluntarily make payments on an account to retain their privileges at the credit union.

Traditionally, there would appear to be no prohibition against the credit union accepting voluntary payments, however, if the debtor does desire to make voluntary payments, the credit union should minimally have a voluntary repayment agreement signed by the debtor and consult with your credit union attorney.

Author: Charles R. Harroun, Author



This entry was posted on Thursday, April 14th, 2022 at 7:57 am and is filed under Bankruptcy, National. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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