In In re Sheppard, Case No. 06-65467, 2006 Bankr. LEXIS 1368 (July 12, 2006), the debtor had filed a pre-petition state court lawsuit against several parties for breach of contract in connection with a lease of office equipment. One of the parties ("Creditor") filed a motion to dismiss, but just prior to the hearing on that motion the debtor filed a Chapter 7 petition. The debtor also filed an ermgency motion to stay the state court hearing. The creditor knew about the filing but the state court hearing proceded and the state court granted the motion to dismiss.
Judge Massey held that the automatic stay did not apply to the creditor’s motion to dismiss —
Hence, the question remains whether the Chapter 7 trustee in Ms. Sheppard’s case is in any way bound by the Superior Court’s dismissal of Debtor’s claims. Wells Fargo was apparently aware of the bankruptcy case but did not seek to join the trustee as a party in the Gwinnett action. It is clear that Wells Fargo’s informal discussions with the trustee could not effect an abandonment of the estate’s interest in the Gwinnett County action: there is a procedure for abandoning property, 11 U.S.C. ? 554, that requires notice to creditors. But the Court need not resolve this question to rule on Ms. Sheppard’s contention that the automatic stay barred Wells Fargo from moving to dismiss the Gwinnett action against it with respect to her interest in that litigation. Go to the description of this Headnote.This Court agrees with the 7th and 11th Circuits that the prosecution of a motion to dismiss an action brought by a debtor in which no counterclaim is filed does not violate the automatic stay, which applies only to actions against a debtor, not to actions filed by a debtor, and to acts to seeking possession of, or control over, property of the estate. The motion to dismiss did not take possession of the lawsuit, which would be impossible because it is intangible property, or exercise control over it in the sense intended in section 363(a)(3).