Thoughts on the Law: “None of My Business” Or “CU Later”? – Does Refusing to Do Business with a Debtor Violate the Automatic Stay?

By The Honorable John P. Gustafson

Can a creditor refuse to do business with a debtor, or is such refusal a violation of the automatic stay?

The case of Brown v. Penn State Employees Credit Union, 851 F.2d 81 (3rd Cir. 1988) held that a credit union’s refusal to continue to do business with a debtor who caused a loss to the institution was not a violation of the automatic stay. As Brown states: “Nothing in the Bankruptcy Code requires this creditor to do business with this debtor. To require dealings would impermissibly extend . . .

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