Bankruptcy Ct. erred in denying debtor’s request under section 105(a) for 60-day stay of guaranty lawsuits totaling $12 billion against debtor’s owner (who had guarantied certain loans issued to debtor) to allow for issuance of bankruptcy examiner’s report concerning potential settlement of all claims in bankruptcy proceeding, where creditors who had received said guaranties challenged in state and federal court owner’s attempts to repudiate said guaranties, and where basis for denial of stay request was Bankruptcy Ct.’s belief that it lacked authority to enter such stay. While instant guaranty lawsuits are not same claims that gave rise to disputes in instant bankruptcy proceeding that challenged owner’s attempt to transfer assets from debtor in order for owner to get out of said guaranties, section 105(a) grants Bankruptcy Ct. ability to stay said lawsuits, where they were sufficiently related to instant disputes, and where guaranty lawsuits could have effect on how much money is left in bankruptcy estate to satisfy all creditors' claims against debtor. Ct. rejected argument that decisions in Fischer, 155 F.3d 876 and Teknek, 563 F.3d 639, precluded such stay, where instant stay could facilitate prompt windup of bankruptcy estate.
Federal 7th Circuit Court
Civil Court
Bankruptcy