Bankruptcy

Does Bankruptcy Automatic Stay Apply to Creditors Located In Other Countries?

By Jonathan Alper

The automatic stay imposed by the filing of a bankruptcy stops all creditors from taking any action to collect a debt from the Debtor or to interfere with property of the bankruptcy estate. I represent a Debtor who owes money on a credit card issued by a bank in Mexico. The Debtor listed the Mexican bank on the Petition. The bank?s collection department continues to send the Debtor faxes and letters trying to collect the same credit card debt. My office called the debt collector and asked him to stop collections. We wrote a letter to the bank?s legal department advising them that their daily faxes to the Debtor violated the automatic stay. The bank refuses to stop collection on the basis that they are located in the U.S. The bank maintains that the automatic stay does not apply to creditors located outside the United States.

My initial research suggests that the bank is not correct. The cases I have found on this issue state that the automatic stay has worldwide effect whether or not this is consistent with domestic law in the relevant foreign country, and that if a creditor violates the stay anywhere in the world, that creditor is subject to sanctions in the United States. The United States courts general recognize orders from bankruptcy courts in other countries and our courts expect, and demand, reciprocal comity. My client is filing a motion for sanctions against the Mexican bank for its multiple stay violations. If I am correct the bankruptcy court will rule that the bank must abide by the stay and sanction them appropriately.

posted by Jonathan Alper, bankruptcy and asset protection lawyer, Orlando, Florida

Full post as published by Florida Bankruptcy Law on September 24, 2009 (boomark / email).