Bankruptcy–Stay of Bankruptcy Proceedings Denied to Creditor Seeking Lien on Exempt Property–Harris v. Hoffman

The appellants, husband and wife, executed a promissory note to the appellee-bank. Thereafter, they purchased real property which they occupied as a homestead. Acting pursuant to an Iowa statute which subjects a homestead to debts contracted before the homestead was acquired, the bank commenced a suit on the note in state court, but this proceeding was stayed when appellants filed a voluntary petition in bankruptcy. After the trustee in bankruptcy set the homestead apart as property exempt under Iowa law, the bank sought a stay of discharge in bankruptcy for a reasonable period of time so that it could obtain a lien on the homestead in the state court. The referee refused, but the federal district court overruled him and granted the stay. On appeal the United States Court of Appeals for the Eighth Circuit, held, reversed. Bankruptcy proceedings should not be stayed to permit a creditor to obtain a post-bankruptcy lien when one obtained by him before bankruptcy would be subject to avoidance under section 67a(I) of the Bankruptcy Act or preservation under section 67a(3) of that Act.