A New York ice cream company won a $23,785,000 federal judgment on July 16, 2026, and by August 14 its defendant was a Chapter 11 debtor in Salt Lake City. That detail matters in Albuquerque more than it might seem. The Bankruptcy Court for the District of Utah and the Bankruptcy Court for the District of New Mexico answer to the same court of appeals, so every rule that decides what Van Leeuwen Ice Cream can do about Rebel Creamery’s filing is the rule a Santa Fe contractor, a Las Cruces landlord, or a Farmington equipment lessor faces when a judgment debtor files here. The case is a live tutorial in Tenth Circuit creditor law, and it has already produced one surprise.
How did a trademark win turn into a bankruptcy case?
The underlying decision, Van Leeuwen Ice Cream LLC v. Rebel Creamery LLC, No. 1:21-cv-02356 (E.D.N.Y. July 16, 2026), found that Rebel’s pint packaging infringed Van Leeuwen’s trade dress and that Rebel had acted in bad faith. The remedy was an accounting of Rebel’s profits under 15 U.S.C. § 1117(a), reduced by a third to reflect demand for keto ice cream that had nothing to do with the packaging, plus a permanent injunction requiring a redesign. Rebel noticed an appeal to the Second Circuit on August 12 and filed In re Rebel Creamery LLC, No. 26-25006 (Bankr. D. Utah), two days later. Its schedules list about $13.78 million in assets, mostly cash, receivables, and inventory, against $23.85 million in liabilities, of which the judgment is essentially all. Rebel scheduled the judgment as disputed because of the appeal. It’s a conventional Chapter 11, not a Subchapter V case, because the judgment alone is roughly seven times the $3,424,000 eligibility limit.
Why is Tenth Circuit law the law of this case?
Because the bankruptcy court sits in Utah, and Utah, like New Mexico, Colorado, Kansas, Oklahoma, and Wyoming, is in the Tenth Circuit. The district court in Brooklyn decided liability, and the Second Circuit will hear the appeal, but every question about the automatic stay, claim estimation, plan confirmation, and administrative expenses will be decided in Salt Lake City under Tenth Circuit precedent. That’s the same precedent the Bankruptcy Court for the District of New Mexico applies, with appeals going to the Tenth Circuit Bankruptcy Appellate Panel unless a party elects the district court under 28 U.S.C. § 158(c). A New Mexico creditor watching this case is watching its own rulebook get applied.
Is the debtor’s own appeal frozen by the stay?
In the Tenth Circuit, yes, and this is the surprise. Some circuits once held that the stay didn’t apply when the debtor was the party appealing, on the theory that the debtor was the one prosecuting the action. The Tenth Circuit abandoned that view in TW Telecom Holdings Inc. v. Carolina Internet Ltd., 661 F.3d 495 (10th Cir. 2011), holding that 11 U.S.C. § 362(a)(1) stays an appeal in any action that was originally brought against the debtor, “regardless of whether the debtor is the appellant or appellee.” Van Leeuwen sued Rebel, so Rebel’s Second Circuit appeal is stayed by Rebel’s own petition. If Rebel wants the appeal heard, it must ask Judge Hunt in Utah for relief under § 362(d), and Van Leeuwen will be heard on whether that’s the right sequence. For a New Mexico creditor the lesson is direct: when a judgment debtor files, its pending appeal doesn’t quietly continue in the background. The creditor gets a seat at the table on whether the appeal runs, whether the claim is instead estimated under 11 U.S.C. § 502(c) in the bankruptcy court, or whether the parties negotiate the number.
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How does a New Mexico creditor lock in a judgment before the petition?
New Mexico uses a transcript of judgment rather than an abstract. Under NMSA 1978 § 39-1-6, filing a transcript with the county clerk creates a lien on the debtor’s real estate in that county, and the judgment remains enforceable for fourteen years under § 37-1-2. The lien is what turns a general unsecured claim into a secured one in the debtor’s later bankruptcy, but only if it was recorded more than 90 days before the petition. A judicial lien created inside that window is a preferential transfer under 11 U.S.C. § 547(b), and a debtor in possession will avoid it. Rebel filed 29 days after judgment, which would have wiped out any lien Van Leeuwen recorded. The New Mexico creditor’s playbook is therefore to record transcripts in every county where the debtor owns real property on the day the judgment is entered, start post-judgment discovery immediately to map assets and recent transfers, and treat any request to reduce or waive a supersedeas bond under Rule 1-062 NMRA as a signal that a petition is coming. When the judgment debtor is an individual rather than a company, New Mexico’s exemptions shape what’s reachable: the homestead exemption is $150,000 under NMSA § 42-10-9, and the 2023 rewrite of § 42-10-1 protects $10,000 in a vehicle, $75,000 in household goods, $15,000 in tools of the trade, and a $15,000 catch-all.
What happens to the injunction and to new infringement?
The money judgment is a claim that will be paid, compromised, or estimated inside the case. The injunction is different. An order to stop selling confusingly similar packaging isn’t a right to payment, so it isn’t a claim and isn’t discharged, and Rebel’s obligation to redesign survives the filing. Enforcing it still requires attention to the stay, because the order was entered prepetition, but nothing in Chapter 11 permits a debtor to keep infringing. If Rebel sells infringing pints after August 14, the resulting liability arises postpetition, and in the Tenth Circuit a postpetition tort claim against the estate can qualify as an administrative expense under the standard in In re Mid Region Petroleum, Inc., 1 F.3d 1130 (10th Cir. 1993), paid ahead of every unsecured creditor. The police-power exception in § 362(b)(4), which the Tenth Circuit addressed in Eddleman v. U.S. Department of Labor, 923 F.2d 782 (10th Cir. 1991), doesn’t help a private plaintiff enforce a private injunction; it protects governmental units. So the creditor’s route is a motion in the bankruptcy court, not self-help.
What does the plan fight look like when one creditor holds nearly everything?
Van Leeuwen holds roughly 99.7 percent of Rebel’s unsecured debt. In a traditional Chapter 11 the debtor needs an impaired class to accept its plan under 11 U.S.C. § 1129(a)(10), and acceptance requires two-thirds in amount. A creditor with that share can’t be outvoted, so Rebel’s paths are a negotiated treatment, an estimation of the claim for voting purposes at a lower figure, or a sale of the business with proceeds distributed through a liquidating plan. Whatever the structure, § 1129(a)(7) requires that Van Leeuwen receive at least what a Chapter 7 liquidation would produce, which is why the creditor’s liquidation analysis, built from the asset map assembled in post-judgment discovery, is the exhibit that sets the floor. A New Mexico creditor in the same position should expect the debtor to argue that book value overstates liquidation value, that administrative costs consume the first layer, and that the appeal creates real risk of a lower claim. Each argument has a forensic answer, and the creditor who prepares it early controls the case.
| Question | Tenth Circuit answer | New Mexico creditor action |
|---|---|---|
| Is the debtor’s appeal stayed? | Yes (TW Telecom) | Respond to any § 362(d) motion; weigh estimation instead |
| Does a judgment lien survive? | Only if recorded 90+ days prepetition (§ 547) | File transcripts of judgment immediately under § 39-1-6 |
| Is the injunction discharged? | No; it isn’t a claim | Seek bankruptcy court leave before enforcing |
| What about new infringement? | Potential administrative expense (Mid Region) | Document postpetition sales; file an administrative claim |
| Who controls the plan vote? | Dominant creditor controls its class | Prepare liquidation analysis for § 1129(a)(7) |
Frequently Asked Questions
Does Tenth Circuit law really apply to a Utah bankruptcy involving a New York judgment?
Yes. The bankruptcy court in Utah applies Tenth Circuit precedent on the stay, claims, and plan confirmation, and the District of New Mexico applies the same precedent. Only the merits appeal of the judgment stays in the Second Circuit.
Can a debtor keep appealing a judgment after filing Chapter 11 in the Tenth Circuit?
Not without relief from the stay. Under TW Telecom, the stay applies to appeals in actions originally brought against the debtor even when the debtor is the appellant.
How does a judgment creditor get a lien in New Mexico?
By filing a transcript of judgment with the county clerk under NMSA § 39-1-6, which creates a lien on the debtor’s real estate in that county. The lien is vulnerable as a preference if the debtor files bankruptcy within 90 days.
What is claim estimation?
A § 502(c) procedure in which the bankruptcy court sets a value on a disputed claim for plan purposes rather than waiting years for other litigation to finish. In practice it moves much faster than an appeal.
Does a bankruptcy filing cancel a permanent injunction?
No. A court order to stop doing something isn’t a debt, so bankruptcy doesn’t erase it. The creditor usually needs the bankruptcy court’s permission before enforcing it during the case.
What if the judgment debtor is a person rather than a company?
New Mexico exemptions then limit what’s reachable: a $150,000 homestead, $10,000 in a vehicle, $75,000 in household goods, $15,000 in tools of the trade, and a $15,000 catch-all, among others.
How North Star Law Firm Can Help
North Star Law Firm represents New Mexico businesses and individuals as creditors in Chapter 7 and Chapter 11 cases, including stay-relief disputes, claim estimation, plan objections, and the liquidation analyses that set a creditor’s floor, and it represents companies staring at judgments they have no way to bond. Phillip Zagotti, JD/CPA, practices before the federal courts in the District of New Mexico, and the asset tracing and valuation work these cases demand is the kind of forensic accounting he has done for years. The firm’s bankruptcy practice covers creditor representation and Chapter 11 matters, and its preference and clawback practice handles the lien-avoidance fights that follow a late-recorded transcript of judgment. Contact North Star Law Firm as soon as a judgment debtor files; the first weeks decide the recovery.