January 12, 2006: Bank's administrative freeze on debtor-depositor's accounts violated automatic stay.
A bank that was not a creditor of a depositor and had received no notice of her Chapter 7 filing, but that had acquired actual knowledge of the bankruptcy case, willfully violated the automatic stay by placing an administrative freeze on the debtor-depositor's accounts, notwithstanding the bank's assertion that it was merely attempting to preserve the status quo until it received some instruction from the Chapter 7 trustee, whom it had promptly notified of the freeze, and to avoid liability for any improper disbursal of funds included in the Chapter 7 estate. The freeze was in the nature of an act to exercise control over property of the estate. If the bank had really been concerned about avoiding liability for any improper disbursal of funds, then it could have closed the account and turned the funds over to the trustee. A split of authority was noted.
A bank that was not a creditor of a depositor and had received no notice of her Chapter 7 filing, but that had acquired actual knowledge of the bankruptcy case, willfully violated the automatic stay by placing an administrative freeze on the debtor-depositor's accounts, notwithstanding the bank's assertion that it was merely attempting to preserve the status quo until it received some instruction from the Chapter 7 trustee, whom it had promptly notified of the freeze, and to avoid liability for any improper disbursal of funds included in the Chapter 7 estate. The freeze was in the nature of an act to exercise control over property of the estate. If the bank had really been concerned about avoiding liability for any improper disbursal of funds, then it could have closed the account and turned the funds over to the trustee. A split of authority was noted.
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