ALP: My company just received notice that a client with a delinquent account has just filed bankruptcy. Can I repossess my property from the client before it is too late?
The short answer is no. If you have ever played the game Monopoly©, you certainly remember the phrase: DO NOT PASS GO, DO NOT COLLECT $200! Any debtor that files bankruptcy is clothed in the protections of the "automatic stay." The automatic stay takes effect the moment a bankruptcy is filed and affects all creditors, whether or not the creditors have received actual notice of the filing of the bankruptcy petition.
The stay has an injunctive effect of preventing any creditor from beginning or continuing any action against the debtor or the debtor’s property to collect or force payment on any monetary obligations owed by the debtor. The stay is primarily a protective device designed to provide the debtor with a "breathing spell" after the filing of a bankruptcy petition to determine the extent of the debtor’s assets and liabilities. The automatic stay makes most post-petition actions such as the seizure of property to satisfy indebtedness void and of no effect. In fact, such actions may subject a creditor to an award of attorney fees for the debtor.
However, a creditor is permitted to ask the bankruptcy court for relief from the automatic stay and if granted, a creditor may then proceed with recovering property from the debtor. Do not play games with the automatic stay. Instead, first seek the advice of a legal professional.
