## Facts

- David Strumpf filed a Chapter 13 bankruptcy petition while maintaining a checking account at Citizens Bank of Maryland and owing the bank about $5,068.75 on a loan in default.
- The bankruptcy filing triggered the automatic stay, including a stay against “the setoff” of a prepetition debt owed to the debtor against a prepetition claim against the debtor.  
- After the filing, the bank placed an “administrative hold” on the portion of Strumpf’s account equal to the loan balance, refusing withdrawals that would reduce the account below that amount.
- Five days later, the bank moved in Bankruptcy Court for relief from the automatic stay and permission to effect a setoff.
- Strumpf moved for contempt, arguing the administrative hold itself violated the automatic stay; the Bankruptcy Court agreed, treated the hold as an unlawful setoff, and sanctioned the bank.
- The Bankruptcy Court later granted stay relief authorizing setoff, but Strumpf had by then reduced the account balance to zero.
- The parties did not dispute that, before bankruptcy, the bank had a state-law right to set off the loan against the deposit account balance.

## Issues

1. Whether a bank’s temporary “administrative hold” on a debtor’s deposit account to preserve setoff rights constitutes a prohibited “setoff” under 11 U.S.C. § 362(a)(7).
2. Whether the hold is an act “to exercise control over property of the estate” barred by 11 U.S.C. § 362(a)(3).
3. Whether the hold is an act “to collect, assess, or recover” a prepetition claim barred by 11 U.S.C. § 362(a)(6).

## Decision

- The Supreme Court unanimously reversed the Fourth Circuit in an opinion by Justice Scalia.
- The Court held the bank’s temporary refusal to honor withdrawals, while promptly seeking stay relief, was not a “setoff” barred by § 362(a)(7).
- The Court held the hold did not violate § 362(a)(3) because the bank did not obtain possession of or exercise prohibited control over estate property; it temporarily withheld payment of its debt pending a stay-relief ruling.
- The Court held the hold did not violate § 362(a)(6) because it was not an act to collect a prepetition claim, but a temporary measure to maintain the status quo while pursuing the Code’s procedure for asserting setoff.

## Legal Principles

- A “setoff” for purposes of § 362(a)(7) requires more than a temporary freeze; it requires an actual decision and action to effect a final netting of mutual obligations.
- A creditor’s temporary withholding of payment on a debt, undertaken to preserve a claimed setoff right and accompanied by a prompt motion for stay relief under § 362(d), is not itself the stayed “setoff.”
- The automatic stay should be read consistently with the Code’s preservation of setoff rights under § 553(a) and related provisions that contemplate judicial authorization before setoff is carried out.
- Temporarily refusing to honor withdrawals from a deposit account, without consummating a setoff, is not necessarily “control” of estate property under § 362(a)(3) and is not necessarily “collection” under § 362(a)(6).

## Conclusion

The Court held that a bank does not violate the automatic stay by imposing a short-term administrative hold on a debtor’s deposit account to preserve an asserted prepetition setoff right while promptly seeking relief from the stay; the hold is neither a setoff under § 362(a)(7) nor an independent violation of § 362(a)(3) or § 362(a)(6).


Citizens Bank of Md. v. Strumpf, 516 U.S. 16 (1995)