Proceedings the Stay Does Not Touch
Subsection (b) is a long list of things a filing does not stop. An act inside it needs no order and no motion, which makes the boundary between an exception and a violation one of the sharpest questions in the opening days of a case, and one with no good-faith defense.
The rule in short
Section 362(b) excludes described acts from the automatic stay entirely. Criminal proceedings, most family law matters, governmental police and regulatory enforcement other than money judgments, certain acts of perfection, and specified financial contract rights all continue without relief from the court. An act within an exception requires no order; an act outside one is a violation even if the creditor believed an exception applied.
The stay provision is written in two halves. Subsection (a) describes what the filing stops; subsection (b) describes what it does not. The second half is far longer than the first, and it is not a list of hardship exemptions. It is a set of categories that Congress removed from the stay entirely, on the view that they either do not compete for the debtor's assets or should not be delayed.
An exception is not relief
The distinction matters procedurally. Where an exception applies, the stay never reached the act, and the party may proceed without asking anyone. Where no exception applies, the party must obtain relief from the court, and acting first is a violation regardless of how strong the case for relief would have been.
That structure puts the risk on the acting party. There is no provision excusing a creditor who reasonably but wrongly believed an exception applied, and the prohibition contains no good-faith element. A creditor who is confident is free to act; a creditor who is uncertain is choosing between the cost of a motion and exposure to damages.
The practical response is the confirmation order. Courts routinely entertain a motion asking for a determination that the stay does not apply, often framed in the alternative as a request for relief. It converts a unilateral judgment into a ruling and is cheaper than litigating a damages claim afterward.
Criminal cases and family matters
The first exception covers the commencement or continuation of a criminal action or proceeding against the debtor. A bankruptcy filing does not interrupt a prosecution, and courts have consistently refused to let the stay be used to that end.
The domestic exceptions are grouped in the second paragraph and are unusually detailed. Proceedings to establish paternity, to establish or modify a domestic support obligation, concerning custody or visitation, for the dissolution of a marriage, and regarding domestic violence all continue. Dissolution proceedings are excepted except to the extent that they seek to determine the division of property that is property of the estate.
Collection of domestic support is treated separately and carefully. The exception reaches collection from property that is not property of the estate, withholding of income for support, suspension of a driver's or occupational license under the relevant federal standard, reporting of overdue support to a consumer reporting agency, and interception of a tax refund. Each is described by reference to a specific provision rather than in general terms.
| Category | What continues | Where the exception stops |
|---|---|---|
| Criminal proceedings | Prosecution of the debtor | Disputed as to collection of monetary components |
| Domestic relations | Paternity, support, custody, dissolution, protective proceedings | Division of property that is estate property |
| Police and regulatory power | Enforcement actions and non-money judgments | Enforcement of a money judgment |
| Perfection | Acts to perfect where the trustee's rights are subject to them | Perfection outside the referenced provisions |
| Financial contracts | Contractual rights of specified market participants | Parties outside the defined categories |
| Tax matters | Audits, assessment and demand for returns | Collection from estate property |
Police and regulatory enforcement
Paragraph (4) excepts the commencement or continuation of an action or proceeding by a governmental unit to enforce its police and regulatory power, including the enforcement of a judgment other than a money judgment obtained in such an action. The exception is limited to specified paragraphs of subsection (a), so it does not open every category.
The money judgment carve-out is the working boundary. An agency may litigate, obtain an order, and enforce an injunction or a remediation obligation. It may not levy on estate assets to satisfy the monetary part of what it won, because that would place it ahead of other creditors outside the distribution scheme. The monetary component is asserted as a claim in the case.
Courts distinguish between enforcement that serves public policy and enforcement that is essentially the collection of a debt, using tests that ask whether the action vindicates a public purpose or merely advances a pecuniary interest. The categories are easy to state and frequently difficult to apply, particularly where a regulator seeks penalties.
A proceeding that continues is not a proceeding that gets paid. A judgment obtained during the case against the debtor personally is still a claim to be asserted in the case, subject to the ordinary priorities, and enforcement against estate property still requires relief. Parties sometimes treat an exception as though it resolved the underlying entitlement, and it does not.
Perfection, setoff and financial contracts
Paragraph (3) excepts acts to perfect, or to maintain or continue the perfection of, an interest in property to the extent the trustee's rights and powers are subject to that perfection under the avoiding-power limitation, or where the act occurs within the period allowed by the preference provision. This is a narrow and technical exception, and it is tied to specific cross-references rather than stated generally.
Financial contracts occupy several paragraphs. Rights of commodity brokers, forward contract merchants, stockbrokers, financial institutions, financial participants, securities clearing agencies and repo participants under securities contracts, commodity contracts, forward contracts and repurchase agreements are excepted, including rights to offset or net out termination values. The categories are defined terms, and a party outside them does not benefit.
Ordinary setoff is not excepted. The right survives the case but its exercise is stayed, which is why a bank that freezes an account rather than applying it has become a familiar intermediate step and a contested one. Related obligations run in parallel: utility service is protected by its own provision requiring adequate assurance of payment, and contracts and leases are handled through assumption or rejection rather than through the stay.
Tax, tenancy and the residual categories
Tax authorities may conduct an audit, issue a notice of deficiency, demand tax returns and make an assessment, all without relief. Collection is a different matter and remains within the stay as to estate property. The pattern mirrors the regulatory exception: the determination of liability proceeds while the collection of it waits for the distribution scheme.
Residential tenancy has its own treatment. Where a lessor obtained a judgment for possession before the filing, continuation of the eviction is excepted, subject to a certification procedure that allows a debtor to cure and to deposit rent. A separate exception covers eviction actions based on endangerment of the property or unlawful use of controlled substances.
The residual paragraphs cover a long tail of specific situations added over the years. For a creditor deciding what to do in the first days of a case, the practical sequence is to read the list against the intended act, and if the answer is not obvious, to treat the act as stayed. The alternative is examined in the consequences of acting in violation, and the ordinary route is a motion for relief on the statutory grounds. Everything else remains within the freeze that began on filing, including matters that will be heard at the first-day hearing.
Points to carry away
- An exception under subsection (b) means the stay never applied, not that it was lifted.
- Criminal actions against the debtor continue without any order.
- Police and regulatory enforcement continues, but enforcement of a money judgment does not.
- Certain acts of perfection are excepted where the trustee's rights are subject to them.
- Financial contract rights held by specified market participants are excepted.
- A misjudged exception is a stay violation, so the safe route is often a comfort order.
Questions readers ask
Why is the money judgment carve-out inside the regulatory exception so important?
The exception permits a governmental unit to commence or continue an action to enforce its police or regulatory power, including the enforcement of a judgment other than a money judgment. So an agency may prosecute a case to judgment, obtain an injunction, and order remediation. What it may not do is collect the money component from estate property, because that would give it priority over other creditors outside the distribution scheme. The agency files a claim for the monetary portion like anyone else.
Does the criminal exception cover restitution collection?
The exception for a criminal action or proceeding against the debtor is broad, and courts have generally allowed criminal prosecutions to continue in full, including sentencing. Collection of restitution ordered as part of a criminal sentence has produced more argument, because it looks like debt collection and functions as part of a criminal judgment. Courts have not been uniform, and the analysis often turns on whether the collection effort is conducted by the prosecuting authority as part of the sentence or by a victim pursuing a civil remedy.
What should a creditor do when the exception is arguable?
Acting on an arguable exception carries the full risk of a violation, because the exception either applied or it did not and a good-faith belief is not a defense to the prohibition. Where the point is genuinely unclear, the ordinary course is to ask the court to confirm that the stay does not apply, or to seek relief in the alternative. Such an order costs a motion and removes the exposure to damages, which for a willful violation can include costs and fees.
Sources
- 11 U.S.C. § 362, Cornell LIISubsection (b) lists the acts excluded from the stay, including criminal, domestic, regulatory and financial contract matters.
- 11 U.S.C. § 546, Cornell LIILimits the trustee's avoiding powers, and is the reference point for the perfection exception.
- 11 U.S.C. § 366, Cornell LIIGoverns utility service, which is protected by its own provision rather than by the stay.
- 11 U.S.C. § 542, Cornell LIIRequires turnover of estate property, an obligation that operates alongside the stay.
- 11 U.S.C. § 365, Cornell LIIGoverns executory contracts and unexpired leases, which are handled by assumption or rejection rather than by the stay.
- Bankruptcy Basics, United States CourtsThe judiciary's overview of what a filing does and does not interrupt.
Rapid Response Law is a publication, not a law firm. This article states general rules and cites its sources; it is not advice about any particular case, and the law differs by state and changes over time.
More in First-Day Relief
How Quickly a Court Must Hear a Stay Motion
Section 362(e)(1) terminates the stay thirty days after a request for relief from a stay of an act against estate property, as to the requesting party, unless the court after notice and a hearing orders it continued. The hearing may be preliminary or consolidated with the final hearing. Where it is preliminary, the court must order continuation if there is a reasonable likelihood that the party opposing relief will prevail, and the final hearing must conclude within thirty days after it.
The Shorter Stay for a Repeat Filer
Section 362(c)(3) provides that where an individual debtor had a case pending within the preceding year that was dismissed, the stay terminates on the thirtieth day after the later filing with respect to the debtor. Section 362(c)(4) provides that where two or more such cases were dismissed, no stay goes into effect at all. In each situation a party in interest may move to continue or impose the stay, and must demonstrate that the later filing is in good faith.
The First-Day Hearing and What Is Heard There
First-day hearings are held within days of a business filing, on shortened notice, to authorize what the debtor needs to keep operating. Rule 6003 prohibits granting listed applications within twenty-one days after the petition is filed unless relief is needed to avoid immediate and irreparable harm, and expressly does not apply to motions under Rule 4001. Cash collateral and financing are therefore heard first, with final hearings following after full notice.