In re Shamus Holdings, LLC and the Automatic Stay

(Excerpt) The automatic stay is recognized as one of the fundamental protections provided by bankruptcy law. The automatic stay prevents creditors from taking almost any type of formal or informal action against the debtor, including commencing or continuing foreclosure actions. There are, however, certain exceptions to the automatic stay, exceptions that permit the creditor to take action against the debtor despite the pendency of the bankruptcy proceeding. This memorandum focuses on one such exception, contained in section 362(b)(3) of the Code, and the effect courts have held it to have on the automatic tolling provision of the Bankruptcy Code. The focus of this memorandum is not necessarily when section 362(b)(3) applies but rather how it is applied. This distinction becomes important when the automatic stay provision is read in light of the automatic tolling provision contained in section 108(c). Though the automatic stay is broad in scope, section 362(b)(3) contains an exception that allows a creditor to take action to perfect or maintain an interest in property of the bankruptcy estate. Tension arises when courts must decide whether creditor action excepted by the automatic stay renders the automatic tolling provision inapposite. This question turns on whether courts view creditor action that is permitted under the automatic stay as action that the creditor is required to take, or, alternatively, as simply action the creditor is allowed to take. On the one hand, some courts that have taken the position that excepted creditor action is required have held that a creditor must take the action that is excepted by section 362(b)(3) and, therefore, any underlying statute of limitations is not tolled. On the other hand, some courts that view excepted creditor action as merely allowed have held that the creditor may take such action, but regardless the underlying statute of limitations remains tolled while the debtor is under the protection of bankruptcy