Critical Case Comment – How Many Cats?

Even though the Chapter 13 debtor’s 36 cats were property of the estate, the county animal control office could pursue possession of the cats and resulting disposition (by way of adoption). (Hagenau) In re Karen Mitchell-Smith, 2022 WL 2195466 (Bankr. N.D. Ga. June 17, 2022)

Case Summary

Sometime in 2021, Henry County Animal Control took possession of 36 cats that were owned by Karen Mitchell-Smith. The HCAC, in compliance with state law and county ordinances, initiated an action in July of 2021 against Karen and her son seeking the costs associated with impounding and caring for 36 cats.

Karen’s response was somewhat predictable. She filed for Chapter 13, asserting that the HCAC held property of the estate that she had exempted and she demanded turnover. The HCAC filed a motion for relief from the stay, to which Karen opposed, asserting that the cats should be returned to her. She also filed a motion for sanctions against HCAC for its violation of the automatic stay in continuing to hold the cats against her will.

In January of 2022, the debtor converted her Chapter 13 case to Chapter 7 but continued to assert that the cats be returned to her since she had exempted all 36 of them. The Chapter 7trustee filed a notice that he proposed to abandon the cats. The debtor did not object to the application to abandon but pursued her motions to compel turnover.

The court held that the cats were, in fact, property of the estate. This did not help the debtor in that the stay, while applicable generally, would not apply if the actions taken by the HCAC against the 36 cats were in the nature of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit’s police power. “Here, HCAC was acting pursuant to its police and regulatory powers, under applicable county and state law, when it seized and disposed of the cats. It has not sought any monetary relief from the Debtor since she filed bankruptcy. Accordingly, HCAC’s actions were excepted from the automatic stay pursuant to § 362(b)(4), and HCAC did not violate the stay by transferring the cats to different facilities.”

Further, because the Chapter 7 trustee had abandoned the cats, the court lacked jurisdiction to consider the turnover request since the abandoned property had been removed from the bankruptcy estate. The abandonment does not transfer ownership or title of the abandoned property, it simply abandons the estate’s interest in it. “The abandoned property revests in the parties with the claims to it as if it had never been held by the Trustee, subject to existing claims and liens.”

The bankruptcy court invited the debtor to pursue the relief she requested in an appropriate non-bankruptcy forum.

What This Case Means to Debtors

Debtors’ counsel should be cautious if, when a debtor seeks bankruptcy relief, they indicate that the county health authorities have confiscated their pets. A debtor’s ability to recover those pets is somewhat circumspect and will not be easy. Here, it looks like the debtor’s counsel not only signed up for a Chapter 13 and a Chapter 7, but also for a trip to state court against Henry County Animal Control.

What This Case Means to Creditors

It was somewhat surprising that the HCAC filed a motion for relief from stay when the clear language of § 362(b)(4) appeared to place their actions outside of the scope of the automatic stay. One could anticipate that the HCAC would be more likely to pursue an application to declare the stay not in effect as to their actions to possess and dispose of the cats. (It should be noted, however, that “dispose of the cats” meant the transfer of the cats to other pet fostering and non-profit agencies.)

Creditors that are in this position, should be careful to avoid the risks of pursuing financial claims against the debtor. Here, the HCAC had a cause of action against the debtor to recover the costs of boarding and disposition of the cats. The HCAC made it clear, however, that it was only pursuing its action to deal with the cats and was not seeking to collect the funds that it would have been entitled to outside of bankruptcy. This is a notable and prudent step for it to have taken.

What This Case Means to Trustees

The Chapter 7 trustee was in a position of abandoning the cats. By issuing the notice of abandonment, as to which no objection was raised, the trustee was essentially no longer involved in the dispute. The Chapter 13 trustee should be grateful that the debtor elected to convert to a Chapter 7 and was therefore not given the opportunity to “work out” a remedial plan to be implemented through a Chapter 13 plan.

Trustees should also be warned to watch out for the debtor that walks into bankruptcy with 36 cats.

Copy of Hildebrand-2016

Chapter 13 Standing Trustee for the Middle District of Tennessee (Nashville)

Henry E. Hildebrand, III has served as Standing Trustee for Chapter 13 matters in the Middle District of Tennessee since 1982 and as Standing Chapter 12 Trustee for that district since 1986. He also is of counsel to the Nashville law firm of Belcher Sykes Harrington, PLLC. Mr. Hildebrand graduated from Vanderbilt University and received his J.D. from the National Law Center of George Washington University. He is a fellow of the American College of Bankruptcy and the Nashville Bar Foundation. He is Board Certified in consumer bankruptcy law by the American Board of Certification and serves on its faculty committee. He is Chairman of the Legislative and Legal Affairs Committee for the National Association of Chapter 13 Trustees (NACTT). He is on the Board of Directors for the NACTT Academy for Consumer Bankruptcy Education, Inc. and is an adjunct faculty member for the Nashville School of Law and St. Johns University School of Law. In addition, he served as a commissioner to the American Bankruptcy Institute’s Commission on Consumer Bankruptcy.

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