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Second Circuit Affirms District Court's Power to Prevent Involuntary Bankruptcy Filings

July 9, 2010

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On June 15, 2010, the Second Circuit Court of Appeals held that district courts possess the authority and discretion to bar the filing of involuntary bankruptcy petitions without the district court's permission. While cautioning that district courts should exercise this authority sparingly, the Second Circuit affirmed that in the context of an SEC receivership, district courts may enter anti-litigation injunctions which prevent any creditor or claimant from filing a lawsuit, lien, encumbrance, or bankruptcy case without first obtaining the district court's approval.

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