Tolling - does the filing of
bankruptcy stop the running of state statute of limitations?
In re: Brenda Marie Jones, No. 10-60000
In a bankruptcy dispute involving the discharge of taxes
owed by debtor in a new chapter 7 case to the California
Franchise Board, judgment of the bankruptcy court is
affirmed where debtor's prior Chapter 13 bankruptcy case had
no effect on the look back period such that the period was
not suspended and the tax debt discharged. Read
more...
Shamus Holdings LLC v. LBM Financial, LLC, No. 10-2216
United States First Circuit, 06/09/2011
...11 U.S.C. § 362(a), which "gives debtors breathing
room by stopping collection efforts in their tracks and
permitting their resumption only when the stay is lifted by
the bankruptcy court or dissolved by operation of law."
229 Main St. Ltd.
P'ship v.
Mass. Dep't of Envtl. Prot. (In
re 229 Main St. Ltd. P'ship), 262 F.3d 1, 3 (1st Cir.
2001). The automatic stay prevents "the commencement or
continuation . . . of a judicial, administrative, or other
action or proceeding against the debtor." 11 U.S.C. §
362(a)(1).
Another statute within the Bankruptcy Code is implicated here.
That statute, 11 U.S.C. § 108(c, is a tolling provision; it
extends state statutes of limitations for creditors who are
barred by the automatic stay from taking timely action
against the debtor.
See Young
v. United States
(In re Young),
233 F.3d 56, 59 n.3 (1st Cir. 2000). It provides in
pertinent part:
[I]f applicable nonbankruptcy law . . . fixes a period for
commencing or continuing a civil action in a court other
than a bankruptcy court on a claim against the debtor, . . .
and such period has not expired before the date of the
filing of the petition, then such period does not expire
until the later of —
(1) the end of such period, including any suspension of such
period occurring on or after the commencement of the case;
or
(2) 30 days after notice of the termination or expiration of
the stay under section 362 . . . of this title . . . with
respect to such claim.
11 U.S.C. § 108(c)
Here, the bankruptcy occurred before the expiration of the
limitations period and, at that time, LBM had the right to
pursue judicial foreclosure.
Id. §
1. Its ability to exercise that right was frustrated by the
automatic stay. That stay prevented LBM, then and
thereafter, from exercising its right to foreclose by
commencement of a court action within the limitations period
fixed by the Obsolete Mortgages Statute.
See
Perry v.
Blum, 629
F.3d 1, 6 (1st Cir. 2010) (explaining that the automatic
stay must be lifted to allow foreclosure to proceed).
The bottom line is that this case falls squarely within the
maw of 11 U.S.C. § 108(c). That tolling provision preserves
LBM's option to commence a judicial foreclosure action until
after the lifting of the automatic stay.
See
Spirtos v.
Moreno (In
re Spirtos), 221 F.3d 1079, 1080-81 (9th Cir. 2000);
Morton v.
Nat'l Bank of N.Y.C.
(In re Morton),
866 F.2d 561, 565-66 (2d Cir. 1989);
LBM Fin., LLC
v. 201 Forest St.,
LLC (In re
201 Forest St., LLC), 422 B.R. 888, 895 (B.A.P. 1st
Cir. 2010).
Tolling and Taxes: the 3-year period that
ordinarily commences on the most recent date the tax return
for the year in question is due, pursuant to 11 U.S.C. §
507(a)(8)(A)(i). The basic rule is, if the tax collection
entity (state or federal) is prohibited from tax collection
due to the existence of the automatic stay in a bankruptcy
case that arose during, or overlapped, the running of the
3-year time, the time is tolled (or "suspended") for the
time in which the previous case's automatic stay overlaps
the 3-year period, plus an additional 90 days.
That rule is relatively simple to apply. You begin
with the due date, extend it out 3 years, then add the time
a prior bankruptcy case stay overlapped, then add on an
additional 90 days.
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