Its Not Final Until Its Over

A little understood aspect of the automatic stay is the effect of a bankruptcy filing on a judgment debtor’s appeal rights. Contrary to what you might think, when a judgment is entered in a pre-bankruptcy action against the debtor, prosecution of the debtor’s appeal of that judgment is subject to the automatic stay. This is on the rationale that the appeal is a “continuation of an action” against the debtor. See, Parker v. Bain, 63 F.3d 1131, 1135-36 (9th Cir. 1995).

I’ve used this a few times on behalf of judgment creditors, and its proved handy. If the debtor wants to continue a pending appeal, relief from stay is required. If the judgment creditor can make a deal with the trustee in the meantime, the expense of defending an appeal can possibly be avoided.

In re Ingeniero, 2007 WL 1453132 (Bankr. N.D. Cal. 2007) points out the flipside of this otherwise salutary rule, as far as judgment creditors are concerned. If a judgment debtor files a petition before the appeal period runs, the debtor is stayed from taking an appeal and the judgment can’t become final until the automatic stay is dissolved, for example by closing of the case. Bankruptcy Judge Jellen of the Northern District of California rejected the judgment creditor’s argument that the appeal period was merely extended under 11 U.S.C. §108(b).