Government’s “Police Power” Exception to Automatic Stay Does Not Apply to Government’s Enforcement of a Money Judgment Against Debtor

Government’s “Police Power” Exception to Automatic Stay Does Not Apply to Government’s Enforcement of a Money Judgment Against Debtor

The issue raised in this case is whether the automatic stay under Bankruptcy Code § 362(a) applies to Rule 11 sanction proceedings in non-bankruptcy judicial forums.

The Rhode Island Superior Court (“State Court”) imposed a sanction of $19,267.06 against the Debtor, payable to a creditor, after proceedings in which it found that the Debtor had violated the provisions of Rule 11 of the Rhode Island Superior Court Rules of Civil Procedure, a rule similar in content and purpose to Rule 11 of the Federal Rules of Civil Procedure and Rule 9011 of the Federal Rules of Bankruptcy Procedure.

The Debtor paid the first installment on the sanction payment, but could not afford to pay any further payments. He filed a Chapter 13 case in order to deal with the debt.

A few hours after filing his petition, the Debtor filed an Emergency Motion to Declare Exclusive Bankruptcy Jurisdiction (“Declaratory Motion,” asking for confirmation that this Court, not the State Court, had exclusive jurisdiction over the monetary sanction. This motion was filed in an effort to forestall a continued hearing that same afternoon before the State Court to enforce the payment of the monetary sanction.

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