No. 75-1684EGUnited States Bankruptcy Court, E.D. Pennsylvania
March 23, 1979
Former Bankruptcy Act — Stay of Proceedings — Modification of Stay — Collateral Action
GOLDHABER, Bankruptcy Judge
A bankruptcy court may modify the stay under Bankruptcy Rule 11-44(d) and permit a creditor, an employee of the Chapter XI debtor, to pursue a discrimination suit against the debtor if the debtor has already had an opportunity to devote its time and efforts towards financial rehabilitation, because this is the most expeditious way to liquidate the creditor’s claim. However, the court noted that the creditor would still be enjoined from enforcing any judgment she might recover. See Rule11-44(d) at ¶ 20,744.
[Digest of Opinion]
Charging that the debtor discriminated against her in her employment with the debtor, the creditor filed a claim with the Equal Employment Opportunity Commission. After receiving a right to sue from that organization, she filed a complaint against the debtor in the United States District Court for the Eastern District of Pennsylvania. This action was brought by the creditor to vacate the stay imposed by Bankruptcy Rule 11-44(a).
“At the outset of any Chapter XI case, a debtor should be insulated against suits brought against it by creditors, enabling the debtor to devote his time and efforts towards financial rehabilitation.” However, the court found that since Rule 11-44(d) allowed for modification of a stay, and further, since the original reason for imposition of the stay had been accomplished, i.e., to enable the debtor to devote its time and efforts towards its financial rehabilitation, it was not now unreasonable or inequitable to require the debtor to respond to collateral issues. Further, the most expeditious way to liquidate the creditor’s claim was to permit the action. Consequently, the court modified the stay, permitting the determination of the issue pending before the district court, but continuing to enjoin the creditor from enforcing any judgment she might recover against the debtor.