Bankruptcy Code Imposes Automatic Stay on Native American Tribes

The United States Bankruptcy Code imposes an automatic stay against creditors’ collection efforts upon filing of a bankruptcy petition. The United States Supreme Court has now held that the Code “unequivocally” strips Native American tribes of their sovereign immunity and that the automatic stay also applies to their debt collection efforts. Lac du Flambeau Band of Lake Superior Chippewa Indians et al. v. Coughlin.

Coughlin filed for Chapter 13 bankruptcy protection in the U.S. Bankruptcy Court for the District of Massachusetts, five months after taking a $1,100 payday loan from Lendgreen, operated by the Lac du Flambeau Band, listing Lendgreen as a creditor. Lendgreen continued to call and e-mail Coughlin to collect the debt, and he moved to enforce the automatic stay. The Lac du Flambeau Band moved to dismiss the motion, and the Bankruptcy Court agreed, finding that the tribe’s sovereign immunity shielded it from the enforcement proceeding.

After the First Circuit reversed and remanded, the Supreme Court agreed to hear the tribe’s appeal. The Court, while recognizing that abrogation of tribal sovereign immunity needed to be unmistakably clear and that Congress had specifically referenced tribes when abrogating immunity in other statutes, found that the Bankruptcy Code’s abrogation of sovereign immunity “exudes comprehensiveness” and includes Native American tribes.

Section 101(27)of the Code, 11 U.S.C.A. § 101(27), defines governmental units whose sovereign immunity is abrogated to include the United States, states, and “other foreign or domestic government” entities. The fact that Congress did not specifically name tribal governments here, where it had done so in other statutes, did not change the outcome as there exists no “magic words requirement.” Accordingly, the Bankruptcy Code’s provisions, including the automatic stay of collection efforts, applicable to creditors including governmental actors apply to Native American tribes as well.

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