Civil contempt and the power of the bankruptcy court to incarcerate the recalcitrant contemptuous

An important recent decision worth discussing is In the matter of Kossoff LLC, 2021 WL 5492186 (Bankr. SDNY 2021), as it examines whether a bankruptcy court has the power to incarcerate someone who has committed civil contempt. In Kossoff, an involuntary bankruptcy petition was filed against a law firm because it was alleged that millions of dollars were missing from the firm’s escrow account. Chapter 7 Administrator Albert Togut sought information and documents from the court-ordered law firm representative. Bankruptcy Judge Jones issued a series of court orders requiring the court-appointed representative to produce certain information and complete schedules. The court-appointed representative failed to comply with various court orders.

The court sentenced the court-appointed representative for civil contempt. Significantly, the court ordered that if the court-appointed representative did not file exhibits and produce a list of creditors, an arrest warrant would be issued: “Unless Mr. Kossoff provides the exhibits required and a list of creditors by November 30, 2021, and demonstrates to the Court that he has done so, the Court will issue a warrant of arrest against Mr. Kossoff on or shortly after December 1, as a sanction coercive for civil contempt intended to induce him to comply with the obligations imposed by the Court.

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