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The Basics of the Automatic Stay:

When a bankruptcy case is filed, the automatic stay of Bankruptcy Code § 362(a) becomes immediately effective, with a few exemptions. The stay provides the debtor with an opportunity to stop creditors from collecting or enforcing on a debt that arose prior to the bankruptcy filing. The stay also prohibits any act to obtain possession of, or to exercise control over, property of the bankruptcy estate and any act to create, perfect, or enforce any lien against property of the estate. The stay also bars commencement or continuation of lawsuits to recover from the debtor, enforcement of liens or judgments against the debtor and the exercise of control over the debtor’s property.

Warning – there are several carve out provisions in Bankruptcy Code § 362.  Also, the stay has a few exceptions, such as criminal proceedings.

The automatic stay remains in place, assuming a creditor does not receive a court order listing the stay, until the case is closed, or a discharge is granted. It then becomes a permanent injunction as to the creditors who were listed in the bankruptcy, or have specific provisions in the Bankrutpcy Code that their debt/obligation survives the discharge.

Medical Center for violating both the automatic stay and the discharge injunction by mailing to Michelle 10 postpetition statements for prepetition debts. After taking evidence at a prove-up hearing, and for the reasons that follow, I will grant the motion in part and award $13,550 and attorney fees.

In re Vibbard, 9/13/22 Oregon analyzing emotional distress and punitive damages with respect to collection letters sent during the automatic stay and/or after discharge when there are no out-of-pocket damages.

Barrientos v. Wells Fargo Bank, NA, 633 F. 3d 1186  (9th Cir. 2011). From Barrientos: III. Conclusion – Because there is no private right of action for violation of a § 524 discharge injunction, Walls, 276 F.3d at 507-10, and because we agree with the Second Circuit that an order of contempt under § 105 to enforce an existing injunction must be sought via motion in the bankruptcy actionsee In re Kalikow, 602 F.3d at 93, the ruling of the district court is AFFIRMED.

See article at American Bankruptcy Institute

Question: Client loaned money to Debtors in California in 2007, and he claims that he took back a contemporaneously executed promissory note and deed of trust as to their California residence in Union City CA. Unfortunately, he failed to record his deed of trust in 2007. The debtors failed to pay, and filed a Chapter 13 bankruptcy case in California in 2013, scheduling the Client as unsecured under Schedule F, but not providing any mailing address for him. Client claims that he had no notice of the bankruptcy case. Client then recorded his deed of trust in California in 2014, 7 years after obtaining it, and also a year after the bankruptcy case was filed, but took no other action. The Chapter 13 case ran 60 months, and was discharged in 2019 with no dividend to unsecureds. Now
(2021) the Client attempts to dunn the Debtors, and gets a letter from the Debtors’ bankruptcy attorney threatening sanctions under section 524 if he does not immediately release his deed of trust. Client wants justice.

Answers: While the post-bankruptcy recording was not valid at the time it was done because it violated the automatic stay, that doesn’t mean that the underlying in rem lien was not valid; it just wasn’t perfected.  The in rem lien was still valid as between the parties, absent affirmative action to avoid it in the bankruptcy case., the debt is not discharged, assuming Client had no “actual” notice. But discharge is not the issue.  The in rem lien survives because the plan did not avoid Client’s lien, even if the underlying debt was discharged.

Willful violation of automatic stay, discharge, actual knowledge

Rushmore Loan Management Services LLC v. Moon (In re Moon), 20-1144 and 20-1057 (B.A.P. 9th Cir. Jan. 7, 2021) Bankruptcy court found willful violation of automatic stay with postpetition collection efforts (chapter 13).  Awarded compensatory damages, emotional distress and punitive, plus attorney fees.but For the reasons stated above, we AFFIRM the Fee Order with respect to the bankruptcy court’s ruling that the Moons were entitled to attorney’s fees for Rushmore’s willful violation of the automatic stay under § 362(k)(1), and we AFFIRM the Fee Order with respect to the amount of costs awarded.  However, because of our decision with respect to the Moons’ other damages and our inability to provide meaningful review of the amount of fees awarded, we VACATE and REMAND that portion of the Fee Order for further consideration by the bankruptcy court.

Jakubaitis v. JPMorgan Chase Bank, N.A. (In re Jakubaitis)  CC-18-1069-FLS (9th Circuit, Mar 07,2019) Not Published  Chapter 71 debtor Frank Jakubaitis received his discharge in 2014, and the bankruptcy court closed his case. In 2018, the bankruptcy court granted creditor JPMorgan Chase Bank, N.A. (“Chase”) relief from the automatic stay to enforce its lien rights against his automobile. Mr. Jakubaitis appeals, arguing that the court should not have granted relief from the automatic stay, because the stay terminated upon his discharge. He also argues that Chase waited too long to seek relief.

The bankruptcy court should not have granted relief from the automatic stay because the stay had already expired, and the court lacked power to grant relief from the discharge injunction. But the discharge injunction left Chase free to enforce its in rem rights against Mr. Jakubaitis’ automobile without seeking permission from the court. Accordingly, the error was harmless, and we AFFIRM.


The Automatic Stay v. The Discharge

The Fair Credit Reporting Act “FCRA” and the Bankruptcy Code deal with debt differently and this difference can become confusing for everyone, including experienced bankruptcy attorneys.  For instance, the legal status of a debt changes as a bankruptcy moves to conclusion.  At the beginning of a bankruptcy the automatic stay stops most creditors seizing assets from the bankruptcy estate’s assets without an order from the Bankruptcy Court. (11 U.S.C. § 362(a)(1))   But the debt is still the same as before the bankruptcy was filed.  If the case is dismissed the creditor has all the same rights as before the case was filed.  Reporting the debt has raised many issues in bankruptcy.  Many courts have found there is no liability under the FCRA to report a debt as being in default, at least until the case is discharged liability under the FCRA. (See, e.g., Nissou-Rabban v. Capital One Bank (USA), No. 15-CV-1675-JLS, 2016 WL 4508241, at *3-4 (S.D. Cal. June 6, 2016); Abbot v. Experian Info. Solutions, 179 F. Supp. 3d 940, 946 (N.D. Cal. 2016)

An order discharging the debt alters the legal nature of the debt and prohibits collection efforts.

Once the order of discharge is entered it “operates as an injunction against the commencement or continuation of an action … to collect, recover or offset any such debt as a personal liability of the debtor.” (11 U.S.C. § 524(a)(2))   Therefore, a discharge order (unlike the automatic stay) alters the legal nature of the debt. Many courts have interpreted the FCRA to require credit reporting agencies “CRA” and furnishers to adjust credit reports after an order of discharge. Where a CRA fails to use reasonable methods to ensure that credit reports show the discharge of debts or where the furnisher fails to correct a report showing that a discharged debt is in default, CRAs and furnishers are subject to liability under the FCRA. (White v. Trans Union LLC, 462 F. Supp. 2d 1079 (C.D. Cal. 2006)


Plans of reorganization are a key component of Chapter 11 and 13 cases.  In order for a reorganization to be successful a plan must be confirmed and completed.  The challenge for the courts is to determine how the debts should be reported on a credit report before completion of the plan.  The order confirming the plan binds the debtor and creditors to the plan’s provisions, (11 U.S.C. § 1327(a)) and controls any pre-existing contracts, including the amount to be paid and lien priority. Once the plan is confirmed the creditors may not relitigate their treatment under the plan (United Student Aid Funds Inc. v. Espinosa, 559 U.S. 260, 269-70 (2010).  Although confirmation binds the parties to the plan’s terms, it does so only as long as the case is active and is subsequently discharged.

If a case is dismissed the debts return to the same position as before the bankruptcy was filed, offset by any monies the creditors received during the case. (11 U.S.C. § 1307)

Given that the bankruptcy is not completed until discharge this raises the issue of whether a credit report can be determined to be inaccurate or misleading if it discloses the pre-petition debt after the bankruptcy court confirms a plan reducing the amount to be paid on the claim, or if it must report the amount established by the confirmed plan (not yet discharged).  You can see the quandary.

Repeated, Unexcused Refusal to Correct a Credit Report to Reflect Bankruptcy Discharge – excellent summary of Discharge Violation, including discussion about Taggart v. Lorenzen, 139 S.Ct. 1795 (2019),

In re Anderson, Anderson v. Credit One Bank, 14-22147 (RDD), 81 (Bankr. S.D.N.Y. Jun. 3, 2022) – Plaintiff Orin S. Anderson (“Plaintiff” or “Anderson”) brought this adversary proceeding for himself and as a putative class action to enforce his and the other class members’ bankruptcy discharge under 11 U.S.C. § 727(b) of their unsecured debts to defendant Credit One Bank, N.A. (“Defendant” or “Credit One”) and its successors and assigns, and the injunction protecting the discharge under 11 U.S.C. § 524(a)(2). The basis for the claimed discharge violation *14 was Credit One’s conceded systematic refusal after the discharge of an unsecured debt upon which it was a reporting entity to notify credit reporting agencies of the debt’s changed status from “charged off” to being subject to the bankruptcy discharge.


For the foregoing reasons, the Court has determined that, (1) under Fed.R.Civ.P. 37(b), (a) Credit One shall be held in violation of Plaintiff’s discharge injunction under section 524(a)(2) of the Bankruptcy Code; (b) Credit One shall be sanctioned under section 105(a) of the Bankruptcy Code employing the standard for contempt with respect to such violation (i) for actual damages comprising Plaintiff’s reasonable fees and expenses, including legal fees and expenses, in enforcing the discharge injunction under section 524(a)(2), and (ii) a mild non-compensatory sum between $50 and $1000, such amount to be determined in the light of Bmw of N. Am. v. Gore, 517 U.S. at 559, and Jennings v. Yurkiw18 F.4th 383, 390 (2d Cir. 2021), after the Court decides the specific amount of Plaintiff’s reasonable fees and expenses and the size, after the time to opt out, of the class certified herein; and (2) a damages class shall be certified under Fed.R.Civ.P. 23(b)(3) comprising…..

In re Altamirano, 4:20-bk-11836-BMW (2/2/22) Arizona Fleet repossessed a vehicle, knowing the owner was in bankruptcy. Hearing on Sanctions.  Was there a Willful Stay Violation?  “(A) party with knowledge of bankruptcy proceedings is charged with knowledge of the automatic stay.” In re Dyer, 322 F.3d 1178, 1191 (9th Cir. 2003).  The law imposes an affirmative duty on creditors to remedy stay violations by restoring the status quo, and also to establish administrative safeguards to present stay violations form occurring in the first instance.  In re Dyer, 322 F.3d at 1192, In re Roman, 283 B.R. at 12.  Court determines debtor is injured by a willful stay violation, Section 362(k) “makes an award of actual damages and attorney fees mandatory, and grants bankruptcy court the discretion to impose punitive damages in appropriate cases.”  In re Schwartz-Tallard, 803 F.3d, 1095, 1099 (9th Cir. 2015).  Court also awards punitive damages.


UPDATE – In re Bradley Taggart, on remand from Supreme Court to 9th Circuit (11/24/20)Reviewing the facts in state court after discharge, Judge Bea decided that the creditors had “an objectively reasonable basis . . . to conclude that Taggart might have ‘returned to the fray.’” [Emphasis in original.] He buttressed the conclusion by identifying the manner in which the debtor could have benefited personally by returning to the fray. In view of the “significantly high standard given to us by the Supreme Court,” Judge Bea ruled that the creditors could not be liable for contempt sanctions. He said that the creditors “had an objectively reasonable basis to conclude that Taggart might have ‘returned to the fray’ in the Oregon state court to obtain some economic benefit.”

Taggart v. Lorenzen, 139 S. Ct. 1795 (June 3, 2019) the Supreme Court raised the bar on holding a creditor in contempt for violating the automatic stay. Some might say that the high court defanged the discharge.

What is the standard of contempt under 11 U.S.C. § 524? (Supreme Court decision)

Taggart v. Lorenzen  139 S. Ct 1795 (6/4/19 – Justice Breyer’s unanimous opinion)

Held:  A court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.  “This standard is generally an objective one. A party’s subjective belief that she was complying with an order ordinarily will not insulate her from civil contempt if that belief was objectively unreasonable. Subjective intent, however, is not always irrelevant. . . . Under the fair ground of doubt standard, civil contempt may be appropriate when the creditor violates a discharge order based on an objectively unreasonable understanding of the discharge order or the statutes that govern its scope”

The opinion clarifies the standard for contempt under 11 U.S.C. § 524. The opinion also includes dicta about the jurisdiction of state courts to decide whether a debt has been discharged.

“…moving litigation out of state courts, which have concurrent jurisdiction over such questions, and into federal courts. See 28 U. S. C. §1334(b); Advisory Committee’s 2010 Note on subd. (c)(1) of Fed. Rule Civ. Proc. 8, 28 U. S. C. App., p. 776 (noting that “whether a claim was excepted from discharge” is “in most instances” not determined in bankruptcy court).”

See also Walls v. Wells Fargo, 276 F.3d 502 (9th Cir. 2002):

“the present scheme [] leaves enforcement to the bankruptcy judge whose discharge order gave rise to the injunction.”

Ninth Circuit Bankruptcy Appellate Panel applied the Taggart standard to violations of the automatic stay.

See Suh v. Anderson (In re Jeong), 19-1244, 2020 BL 102971 (B.A.P. 9th Cir. March 16, 2020). In Suh, “Appellant Min W. Suh appeals the bankruptcy court’s order holding him in contempt for his involvement in the postpetition filing of two “corrective” deeds of trust against the debtors’ residence. Suh jointly represented both the debtors and the junior secured creditors during the case and argues that the creditors were not stayed from recording the corrective deeds under § 362(b)(3).1 We agree with the bankruptcy court that Suh clearly violated the automatic stay. Because Suh had no objectively reasonable basis for concluding that his conduct did not violate the stay, the bankruptcy court did not abuse its discretion when it held him in contempt of court and imposed sanctions.”

In re Moon, 13-12466 (Bankr. D. Nev. Feb. 25, 2020)  Lengthy discussion in the drama caused by the loan servicer.  Despite knowing about the chapter 13, Rushmore Servicing continued to contact the debtors 648 times during the chapter 13 ( Rushmore Mortgage’s claim would be reclassified under the Chapter 13 plan as an unsecured claim). Debtor pled emotional distress and actual damages. The court found punitive damages of $200,000, plus atty fees were appropriate (despite Taggart).

Easley v. Collection Services of Nevada, 17-16506 (9th Cir. Dec. 20, 2018)  The Ninth Circuit became the first court of appeals to rule that a debtor is entitled to appellate counsel fees for successfully overturning a lower court’s order and winning larger damages for a willful violation of the automatic stay.

The creditor had committed a willful violation of the automatic stay. The chapter 13 debtor sought damages and attorneys’ fees under Section 362(k). The section provides that “an individual injured by any willful violation of [the automatic stay] shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”

The Bankruptcy Code (the Code) provides hard-pressed debtors with an opportunity to obtain some relief from their financial burdens. One critical tool in the Code aiding an orderly bankruptcy process is an automatic stay of creditor actions to collect preexisting debts from debtors who have filed for bankruptcy protection. See 11 U.S.C. § 362(a). The Code provides that injured debtors may sue for “actual damages, including costs and attorneys’ fees” for willful violations of the stay. Id.§ 362(k)(1). We previously held in In re Schwartz-Tallard,803 F.3d 1095, 1101 (9th Cir. 2015) (en banc), that this provision authorizes the court to award reasonable attorneys’ fees and costs incurred on appeal in defending a judgment rendered pursuant to § 362(k). We now clarify that § 362(k) also authorizes attorneys’ fees and costs to the debtor incurred on appeal in successfully challenging an initial award made pursuant to § 362(k).

Marino vs OCWEN, BAP No. NV-16-1229-FLTi & NV-16-1238-FLTi (9th Cir. BAP 12/22/17) The Bankruptcy Court found that Ocwen had sent nineteen offending letters (despite  and made one hundred phone calls, and it awarded $1,000 per letter and call as emotional distress damages. The court entered an order (“Sanctions Order”) awarding the Marinos $119,000 in emotional distress damages.

BAP HELD: The bankruptcy court did not err in finding that Ocwen’s communication with the Marinos knowingly and willfully violated the discharge injunction. Also, that the bankruptcy court properly found that the written correspondence violated the discharge injunction (even those that contained “disclaimer” language). Finding the cumulative effect of the letters as an attempt to collect a debt.

One of the primary purposes of the Bankruptcy Act is to relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes. This purpose of the act has been again and again emphasized by the courts as being of public as well as private interest, in that it gives to the honest but unfortunate debtor who surrenders for distribution the property which he owns at the time of bankruptcy, a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt. The various provisions of the Bankruptcy Act were adopted in the light of that view and are to be construed when reasonably possible in harmony with it so as to effectuate the general purpose and policy of the act. Local Loan Co. v. Hunt, 292 U.S. 234, 244–45 (1934)

As to the award of punitive damages: the BAP held “It was thus an error for the bankruptcy court to preclude itself from considering an award of punitive damages. We do not hold that the bankruptcy court must award a fine or punitive damages, but we remand so that the bankruptcy court can consider whether to do so.”

In Re: Lansaw,  April 10, 2017 (United States Third Circuit) – In a case arising out of repeated violations of the bankruptcy automatic stay of debt collection activities, 11 U.S.C. section 362(a), committed by debtors’ landlord, the district court’s judgment in favor of debtors and award of damages under section 362(k)(1) are affirmed where:1) section 362(k)(1) authorizes the award of emotional-distress damages and the debtors presented sufficient evidence to support such an award; and 2) debtors were properly awarded punitive damages.

In re Ragone, 2021 WL 1923658 (6th Cir. BAP May 13, 2021). The issue in this appeal is whether the appellants, Stefanik & Christie, LLC (“Stefanik & Christie”), and attorney John R. Christie (“Christie”) (collectively, “Appellants”), committed a sanctionable violation of 11 U.S.C. § 5241 by continuing to pursue garnishment on a discharged debt and failing to turnover improperly garnished funds. The bankruptcy court applied the Supreme Court’s decision in Taggart v. Lorenzen, ___ U.S. ___, 139 S.Ct. 1795 (2019), and concluded that the Appellants’ refusal to terminate the garnishment proceedings and failure to return the monies garnished post-discharge were objectively unreasonable. The bankruptcy court sanctioned the Appellants $4,275.39 (the amount of funds garnished post-discharge from Ragone’s wages) and $10,580.00 in attorney fees Ragone incurred in attempting to stop the garnishment and recover the improperly garnished funds through both state and bankruptcy court proceedings.The bankruptcy court sanctioned the creditor’s lawyer for continuing the garnishment and refusing to return garnishment proceeds after the debtor’s counsel notified him that the debt was discharged.  On appeal the appellate court rejected both arguments and affirmed.

The Co-Debtor Stay:

In a Chapter 13 bankruptcy, the automatic stay extends to any creditor taking an action against “any individual that is liable on such a debt with the debtor,” such as a co-maker, as long as the debt at issue is a consumer debt that was not incurred by the co-maker in the ordinary course of their business and the chapter 13 case remains open and is not converted to a chapter 7 or 11.

Facts: Wife files chapter 13, but husband does not file, but owes on a defaulted credit card.  It is a community debt–although husband acquired the credit card while married, wife is NOT named on the account.

Question: Does the filing of the chapter 13 by wife make a subsequent lawsuit against husband a violation of the co-debtor stay?

Answer: Yes.  But contact the Creditor/Creditor Attorney pointing out the automatic stay of a co-debtor.  Most Judges want some written notice making a demand to cease and desist.   Actual notice has always been an issue in contempt actions.

Question: Can the creditor lift the stay under 1301(c)(2) if the plan does not propose to pay 100% of the claim?

Answer: No. Because the Estate contains the community assets including non-filing spouse’s income. Normally the stay can only be lifted in order to enforce an existing judgment against separate property of the non-filing spouse.

Section 362(a) does not stay actions against guarantors, sureties, corporate affiliates, or other non-debtor parties liable on the debts of the debtor.

The Ninth Circuit has stated: In re Chugach Forest Prods., Inc., 23 F.3d 241, 246 (9th Cir. 1994) (quoting In re Advanced Ribbons & Office Prods., 125 B.R. 259, 263 (B.A.P. 9th Cir. 1991)) As a general rule, “[t]he automatic stay of section 362(a) protects only the debtor, property of the debtor or property of the estate. It does not protect non-debtor parties or their property. Thus, section 362(a) does not stay actions against guarantors, sureties, corporate affiliates, or other non-debtor parties liable on the debts of the debtor.”

Further, the Court “does not have the jurisdiction to extend the stay to a non-debtor party.” Placido v. Prudential Ins. Co. of Am., 2010 WL 334744, at *1 (N.D. Cal. Jan. 21, 2010) (“In order to apply the automatic stay outlined in 11 U.S.C. § 362 to a non-debtor party, the bankruptcy court must issue an extension of the
stay under its jurisdiction.”) (citing Boucher v. Shaw, 572 F.3d 1087, 1093 (9th Cir. 2009)). A party seeking to extend the stay to co-defendants or others must affirmatively seek an order from the bankruptcy court. Totten v. Kellogg Brown & Root, LLC, 152 F.Supp.3d 1243, 1268 (C.D. Cal. 2016).[

Hunsaker, v. US, 16, 35991 (9th Cir. 8/30/18) Held that the Internal Revenue Service could be liable for emotional-distress damages for willfully violating an automatic stay by sending collection notices to a couple who had filed for bankruptcy. The government argued that it was protected from liability by sovereign immunity. Disagreeing, the Ninth Circuit held that the Bankruptcy Code unambiguously waived sovereign immunity. The panel therefore reversed and remanded with instructions to consider the government’s challenge to the merits of the debtors’ claims.

NOTE: the Hunsaker case created a split of circuits because the First Circuit had held in U.S. v. Rivera (In re Rivera), 432 F.3d 20 (1st Cir. 2005), that Section 106(a) does not waive sovereign immunity for emotional distress damages resulting from a stay violation.

In re Stinsen, Charles E. (9th Cir. BAP 2003) EMOTIONAL DAMAGES FOR VIOLATION OF 362 REQUIRES SUBSTANTIAL ECONOMIC LOSS  In order to receive an award for emotional damages under 11 USC 362(h), there must be significant economic loss caused by the willful violation of the automatic stay. A debtor must first show a significant economic loss caused by the stay violation and then establish that his loss caused him emotional injury.

This opinion thoroughly explores the state of case law on this issue; when is the debtor entitled to general damages for violation of the automatic stay? As demonstrated by the analysis in this case, it is an unsettled issue.

Dingley v. Yellow Logistics, LLC, 14-60055  (9th Cir, March, 2017) In an Chapter 7 bankruptcy case, the BAP’s decision is affirmed on different grounds where the bankruptcy court erred by sanctioning creditors for violating the automatic stay by pursuing civil contempt proceedings against the debtor based onD his failure to pay discovery sanctions in a state court action, because civil contempt proceedings are exempted from the automatic stay under the Bankruptcy Code’s government regulatory exemption, 11 U.S.C. section 362(b)(4), when, as here, the contempt proceedings are intended to effectuate the court’s public policy interest in deterring litigation misconduct.

In re Partida, No. 15-60045 BAP No. 14-1482 (9th Cir, appeal from BAP, April 19, 2017) In an opinion by Circuit Judge Mary M. Schroeder, the Ninth Circuit held that the “plain language” of the MVRA (Mandatory Victims Restitution Act) contains an exception to the automatic stay. That statute, 18 U.S.C. § 3613(a), provides that the government “may enforce a judgment imposing a fine . . . . Notwithstanding any other Federal law . . . , a judgment imposing a fine may be enforced against all property or rights of the person fined.”

In re Sepehry-Fard,  NC-17-1118-BTaF & NC-17-1123-BTaF (9th Circuit, Jun 05, 2018)  BAP for 9th Cir. dismissed as moot and affirmed remaining ruling of bankruptcy court (ND Cal.) ruling that automatic stay expired after 30 days for repeat filer, and alternatively granting relief from stay for cause, and denied debtor’s motion for sanctions. Dismissal of debtor’s chapter 13 case while appeal was pending mooted appeal on 11 USC 362(d)(4) in rem ruling that stay did not apply. BAP affirmed order granting relief from stay alternatively under 11 USC 365(d)(1) for cause. Vexatious litigant/repeat filer failed to demonstrate any basis for sanctions.

In re Rose (Rose v. Select Portfolio Servicing) 19-50598 (5th Cir. 12/10/19) Disagreeing with a decision by the First Circuit last December, the Fifth Circuit rules that the ‘plain language’ in Section 362(c)(3)(A) does not terminate the automatic stay as to estate property 30 days after the second filing within one year.

Smith v. State of Maine Bureau of Revenue Services (In re Smith), 18-1573 (1st Cir. Dec. 12, 2018) The court was asked to decide whether the automatic termination of the stay 30 days after a repeat filing only ends the stay as to the property of the debtor, but not property of the estate.

Adopting the position taken by a minority of lower courts regarding Section 362(c)(3)(A), the First Circuit held on December 12 that the stay automatically terminates as to debtor, property of the debtor, and property of the estate. The First Circuit concluded that Congress so poorly drafted subsection (c)(3)(A) that the canons of statutory construction provide little utility in divining the answer

In re Schwartz-Tallard, No. 1260052 (9th Cir. Oct. 14, 2015). A debtor may recover all attorney fees incurred in prosecuting an action for damages under § 362, not just those incurred until the stay violation ceases.

In re Perl CC-13-1328-KiTaD (B.A.P. 9th Cir. May 30, 2014) Purchaser of debtor’s property at foreclosure sale violated the automatic stay by not advising the Sheriff to desist in its efforts to lock out and evict Perl from the Residence. We further note that changing the locks on the Residence, locking inside Perl’s personal property, which was also property of the estate, was an act to exercise control over property of the estate in violation of § 362(a)(3). See In re Gagliardi, 290 B.R. 808, 815 (Bankr. D. Colo. 2003).
VI. CONCLUSION  Based on the foregoing reasons, we AFFIRM the portion of the Order ruling that the postpetition lockout/eviction by the Sheriff of the debtor from his residence on June 27, 2013, violated the automatic stay and is void.

Rupanjali Snowden v. Check into Cash of Washington, Inc  Matter of Snowden, No. 13-35291 (9th Cir. Sep. 12, 2014)  Ruling:  For an automatic stay violation, the chapter 7 debtor was entitled to receive emotional distress damages, punitive damages, and attorney fees incurred to end the violation, but not fees incurred to recover damages.

The bankruptcy court awarded the debtor emotional-distress damages, punitive damages, and attorney fees incurred through the date the creditor made a conditional offer to return the funds improperly taken from the debtor’s bank account after the petition date. The district court affirmed. The court of appeals affirmed the bankruptcy court’s decisions on emotional-distress damages and punitive damages, but it reversed the bankruptcy court’s award of attorney fees because the award excluded some fees incurred to end the stay violation.

America’s Servicing Co. v. Schwartz-Tallard, No. 12-60052 (9th Circuit, 04/16/2014) The Bankruptcy Appellate Panel’s reversal of the bankruptcy court’s decision is affirmed where the bankruptcy debtor was not precluded from recovering, as damages, attorney fees for defending against a creditor’s appeal of a finding that the creditor violated the automatic stay.

In re Norman, 346 B.R. 181 (Bkrtcy.N.D.W.Va. 2006) DEBTOR WHO FILED MOTION TO EXTEND STAY TOO LATE TO BE HEARD WITHIN 30 DAYS OF FILING PETITION COULD NOT GET EXTENSION § 362(c)(3)(B), § 362(c)4)(B). The debtor, a one-time repeat filer, filed motion to extend the automatic stay on the 28th day following filing the petition. The court ruled this was not adequate time for notice to parties and hearing on the motion could not be had, and hence order extending stay could not be had, within the 30-day period prescribed by the Code. The debtor argued that he was only required to file the motion within the 30-day period, not obtain an order, pursuant to § 362(c)(4)(B). The court pointed out that this section pertains only to cases where the debtor is a two-time repeat filer, and provides that the stay does not take effect upon filing the petition, but the court can order the stay imposed if a motion is made within 30 days.

In re Brandon, 349 B.R. 130 (Bkrtcy.M.D.N.C. 2006) CATHERINE R. CARRUTHERS, Bankruptcy Judge AUTOMATIC TERMINATION OF STAY IN CASE OF REPEAT FILER TERMINATED STAY AS TO PROPERTY OF THE DEBTOR BUT NOT AS TO PROPERTY OF THE ESTATE §362(c)(3)(A) Where debt had a prior case pending within a year of filing the present case. Pursuant to newly added § 362(e)(3)(A) the automatic stay automatically terminated on the 30th day following the petition filing. The court held that the stay was not terminated as to property of the estate. The court also reiterated the rule that the stay is not terminated as to any creditor’s action unless it was taken prepetition, pursuant to the language ” … with respect to any action taken.”

In re Striblin, 349 B.R. 301 (Bkrtcy.M.D.Fla. 2006) JERRY A. FUNK, Bankruptcy Judge NEW EXCEPTION TO AUTOMATIC STAY APPLIES ONLY TO POSTPETITION TRANSFERS INITIATED BY THE DEBTOR § 362(b)(24) Third party, in ignorance of debtor’s recently filed bankruptcy, purchased debtor’s homestead property at a scheduled foreclosure sale. The transfer was a violation of Code § 549, unauthorized transfer of property of the estate, and was avoidable. The Reform Act added § 362(b)(24), a new exception to the automatic stay for transfers not avoidable under § 549 or 544. The court held that the transfer in this case was not initiated by the debtor and was thus avoidable. Accordingly, it did not fit under the newly enacted exception to the automatic stay, and the sale was void.

From ABI’s BLOG – 7/06 Generally, where a debtor has been in one prior bankruptcy case which has been dismissed within the year prior to the current case, new 362(c)(3) provides that certain protections of the automatic stay terminate on the 30th day unless a motion to extend the stay is filed and heard before the 30th day. We mentioned in Part IV how the decision in In re Toro-Arcila, 334 B.R. 224 (Bankr. S.D. Tex. 2005) effectively found a way around the 30-day deadline for hearing a motion to extend the stay under 362(c)(3) by holding that a single repeat filer could still use the provisions of 362(c)(4) (which generally cover multiple repeat filers) to reimpose the stay after they stay had expired. Typically this situation arises where the debtor files the motion too close to the 30th day to get a hearing (there is generally no good reason for waiting so long, by the way). At least one other court has concurred with Toro-Arcila, and has ruled that a debtor who files a motion within the 30 day period, but fails to get it heard, can still pursue reimposition of the stay under 362(c)(4). In re Beasley, 339 B.R. 472 (Bankr. E.D. Ark. 3/16/06).

Judge Dalis in Georgia disagreed. In re Whitaker, 341 B.R. 336 (Bankr. S.D. Ga. 4/20/06). All was not lost for the debtor, though. Judge Dalis did not subscribe to the reasoning in Toro-Arcila that much of 362(c)(4)(D) would be rendered meaningless surplusage if that section only applied to multiple repeat filers. But since the debtor had established a case to overcome the presumptive lack of good faith, and there was no other way of granting relief, the court held that it could reimpose the stay under 11 U.S.C. s. 105, which gives the court authority to issue orders “necessary or appropriate” to carry out the provisions of the Code. In doing so, Whitaker relied on a long line of prior decisions recognizing the authority to reimpose the stay in appropriate circumstances.

While Beasley and Whitaker involved situations where stay extension motions were filed on the eve of the 30 day deadline, and consequently could not be heard before the deadline passed, creditors nonetheless should be aware that they need to be on their toes. In In re Frazier, 339 B.R. 516 (Bankr. N.D. Fla. 3/17/06), a court held that five days’ notice of a hearing on a motion to impose the stay under 362(c)(4) was adequate. In Frazier, the court reports that the debtor’s counsel prior to filing the motion had called the counsel who represented the creditor in the prior case, and served the motion and notice of hearing by fax and mail, and that the creditor (and counsel) did not respond to the motion or appear at the hearing. The creditor then moved for reconsideration, claiming not to have received notice, but at the hearing on the motion for reconsideration failed to provide any evidence and the lawyer appearing had minimal knowledge of the case. The Frazier court held the notice adequate, and made clear that it expected creditors to be prepared to respond to such motions on short notice: “The limited automatic stay for repeat filers is a major feature of BAPCPA which was passed by congress at the behest of the credit industry. Now that they have it, the credit industry, and especially the mortgage servicing companies and the law firms they retain to represent them, need to adapt their practices in order to deal with what they have created.”

But one of the most significant – and perhaps surprising – ways in which the significance of the 362 amendments has been limited is that courts are actually taking Congress at its word. Specifically, in 362(c)(3)(A), Congress amended the Code to provide that when a debtor has been in a prior case dismissed within a year of the present filing, the stay shall terminate “with respect to the debtor” on the 30th day after the filing date unless an extension of the stay is granted. Now, bankruptcy practitioners know that “property of the debtor” is generally something different than “property of the estate”. Section 362 as it existed prior to the amendments makes multiple, clear distinctions between property of the debtor and property of the estate, and the effect of the stay as to each. Moreover, Congress used different language in 362(c)(4) in describing what happens to multiple repeat filers (i.e., more than one prior case dismissed in the year prior to the current case), where it says, without any such distinctions, that “the stay under subsection (a) shall not go into effect.”

Applying generally accepted principles of statutory construction — that when particular language is used in one section but not another, it is presumed that Congress acts purposefully in using the different language to signify different meanings — several courts have held that 362(c)(3), if triggered, terminates the automatic stay only as to actions against the debtor or against property of the debtor, but not against property of the bankruptcy estate. See, e.g., In re Harris, 342 B.R. 274 (Bankr. N.D. Ohio 5/1/06); In re Jones, 339 B.R. 360 (Bankr. E.D.N.C. 3/21/06); In re Moon, 339 B.R. 668 (Bankr. N.D. Ohio 3/28/06). Each of these courts notes that if Congress had intended to terminate the stay completely after 30 days for single repeat filers under 362(c)(3), it could have simply used similar language to that used for multiple repeat filers under 362(c)(4). Having chosen not to do so, judges must assume Congress meant what it said.


§ 362(c)(3)(C)(i) and 362(c)(3)(C)(ii)

Debtor’s motion to extend the automatic stay brought timely with 30 days of filing the petition was denied on grounds of bad faith where debtor could not demonstrate change of circumstances from previous dismissed case.



The court found the second filing was in good faith as to all creditors where:

– The Debtors’ Second Filing was dismissed for failure to make payments pursuant to a proposed plan of reorganization that had not yet been confirmed, the provision in Section 362(c)(3)(C)(i)(II)(cc) — failure to “perform the terms of a plan confirmed by the court” — does not apply.

– There is no evidence that the Debtors failed to file or amend their petition, or other documents in the Second Filing. There is also no record in the Second Filing of any motion to lift the automatic stay, and no evidence that the Debtors failed to provide court-ordered adequate protection to any party.

– The Debtors have filed affidavits from their daughter, Amy Wade, and son-in-law, William Wade, stating that they are willing and able to fund the Debtors’ plan in the amount necessary to complete a Chapter 13 plan.


Debtor had a previous case that had been dismissed within a year of filing the second case. The debtor’s attorney filed a motion pursuant to § 362(c)(3)(B) prior to the expiration of the 30-day deadline in which hearing must be held. However, the attorney relied on the court clerk to calendar the actual hearing within the 30-day period. Clerk actually set the hearing at a date beyond the 30-day deadline.

Court held error in relying on clerk was not sufficient grounds to order an extension of the stay. Motion was denied. “However, to say that the Clerk’s Office should have scheduled the Motion for a hearing to be held prior to the Hearing Deadline is not dispositive here. The Debtors were the movants and it was their ultimate burden to insure that the Motion was timely scheduled. When the Notice of Hearing was not issued timely (i.e., within three days), it was incumbent on the Debtors’ counsel to take action. A telephone call to the Clerk’s Office probably would have produced the necessary corrective action.”

Americredit Fin. Servs., Inc. v. Nichols (03/16/06 – No. 04-2107) (6th Cir) Denial of a creditor’s motion to lift an automatic stay and grant of debtors’ motion to modify their Chapter 13 bankruptcy plan pursuant to 11 U.S.C. section 1329 is affirmed where, under the circumstances of the case, there was no abuse of discretion in the decisions.
http://caselaw.lp.findlaw.com/data2/circs/6th/042107p.pdf [PDF File] – a good review of motion for relief practice and standards.

Gasprom, Inc v. Fateh, et al. (In re Gasprom, Inc) CC-12-1567-KuKiTa, (9th Cir. BAP 10/29/13) Ruling:  Foreclosure of real property was in violation of automatic stay where chapter 7 trustee abandoned real property but bankruptcy case was still open and creditor had not obtained relief from stay.  The bankruptcy court here concluded that the August 1, 2012 foreclosure sale had not violated the automatic stay. The bankruptcy court reasoned that the Trustee’s abandonment of the Gas Station earlier that same day had fully terminated the stay as to the Gas Station. We disagree. By operation of law, the August 1, 2012 Abandonment Order only terminated one aspect of the stay, the aspect protecting the Gas Station as “property of the estate.” Upon abandonment, the Gas Station no longer was property of the estate; title to the Gas Station reverted to Gasprom. See Catalano v. Comm’r, 279 F.3d 682, 685 (9th Cir. 2002). Hence, the aspect of the stay protecting estate property no longer applied. See § 362(c)(1).

But the abandonment did not by operation of law terminate the aspect of the stay arising from § 362(a)(5), which protects “property of the debtor.” Absent a ruling by the court granting relief from stay under § 362(d) so as to permit foreclosure to occur, § 362(a)(5) continued to protect the Gas Station from foreclosure, at least until the bankruptcy court closed Gasprom’s bankruptcy case on August 16, 2012. See § 362(c)(2).

CATALANO v. COMM’R INTERNAL REVENUE (01/28/02 – No. 00-70998) (9th Cir Ct Apps) A court order granting relief from an automatic stay in bankruptcy, under 11 U.S.C. Section 554, does not by itself constitute a de facto abandonment of property by the bankruptcy estate.

Failure to return vehicle after bankruptcy filed:  , “that mere retention of property does not violate the [automatic stay in] § 362(a)(3).”

UPDATE OR SUPPLEMENT TO FULTON Fulton provides that Section 362(a)(3) only “prohibits affirmative acts that would disturb the status quo of estate property,” the Court did not rule on whether the city’s actions or inaction might have violated subsections (a)(4), (a)(6) or (a)(7) of Section 362(a). Id. at 590.

In re Emeldia Cordova, US BK Court, ND of Ill, Eastern Division, 12/6/21) In an opinion on December 6, Bankruptcy Judge Timothy A. Barnes of Chicago held that Fulton by itself did not compel dismissal of a class action where the plaintiffs alleged that refusing to release their impounded cars after a chapter 13 filing violated subsections (a)(4), (a)(6) or (a)(7) of Section 362(a) and Section 542(a). The cars had been impounded for failure to pay parking fines.

City of Chicago v. Fulton– U.S. Supreme Court (1/14/2021) U.S. Supreme Court unanimously overturn precedent, including 9th Circuit precedent, that allowed Debtors and Trustees to get automatic requirement of turnover under 11 U.S.C. §362(a)(3).  The Debtors vehicles were impounded by the City of Chicago for parking tickets and other vehicle fines. The Debtor’s filed Chapter 13 and demanded the vehicles return under §362(a)(3)’s provision that bars a a creditor from exercising “control” over property of the estate or the debtor. Ninth Circuit precedent required the creditor turnover the property, including secured creditor who had repossessed the property. In re Del Mission Ltd., 98 F. 3d 1147, 1151– 1152 (CA9 1996).  The Supreme Court found that the use of §362(a)(3) to demand return of collateral would render the provisions of Bankruptcy Code §542 turnover requirements superfluous. The mere retention of collateral is not itself a violation of the §362 stay.

Justice Sotomayor, concurring: “Although the Court today holds that § 362(a)(3) does not require creditors to turn over impounded vehicles, bankruptcy courts are not powerless to facilitate the return of debtors’ vehicles to their owners. Most obviously, the Court leaves open the possibility of relief under § 542(a). That section requires any “entity,” subject to some exceptions, to turn over “property” belonging to the bankruptcy estate. 11 U.S.C. § 542(a). The debtor, in turn, must be able to provide the creditor with “adequate protection” of its interest in the returned property, § 363(e); for example, the debtor may need to demonstrate that her car is sufficiently insured”  “Ultimately, however, any gap left by the Court’s ruling today is best addressed by rule drafters and policymakers, not bankruptcy judges. It is up to the Advisory Committee on Rules of Bankruptcy Procedure to consider amendments to the Rules that ensure prompt resolution of debtors’ requests for turnover under § 542(a), especially where debtors’ vehicles are concerned. Congress, too, could offer a statutory fix, either by ensuring that expedited review is available for § 542(a) proceedings seeking turnover of a vehicle or by enacting entirely new statutory mechanisms that require creditors to return cars to debtors in a timely manner.”

Weber v. SEFCU, No. 12-1632 (2nd Cir, 05/08/2013) Judgment finding that defendant violated the Bankruptcy Code’s automatic stay provision, 11 U.S.C. section 362, is affirmed, where: 1) defendant exercised control over property of the debtor’s bankruptcy estate in contravention of section 362 when it failed to relinquish the debtor’s vehicle promptly after it learned that a Chapter 13 petition was filed; and 2) because defendant willfully violated section 362(a), it is liable under section 362(k) for debtor’s actual damages, costs, and attorney’s fees and the matter is remanded for a determination of the same. Read more…

In WD Equipment v. Cowen (In re Cowen), 849 F.3d 943 (10th Cir. Feb. 27, 2017), the appeals court held that passively holding an asset of the estate, in the face of a demand for turnover, does not violate the automatic stay in Section 362(a)(3) as an act to “exercise control over property of the estate.” Cowen involved a lender who repossessed a debtor’s truck before bankruptcy and refused to return the vehicle after the chapter 13 filing.  (Note – excellent discussing on majority and minority positions and split in circuits.)

When there is a pending garnishment to file a Motion to Quash the Garnishment with the Order telling the Creditor to release any monies to the Trustee. The garnishing creditor, and attorney, have an affirmative duty to quash the wage garnishment. See Sternberg vs. Johnson, 582 F.3d 1114 (9th Cir. 10/2009)

You have a credit card with your credit union.  You filed for bankruptcy and the credit union froze the account. They say you can get those funds if you reaffirm the debt to the Credit Union.

SCOTUS case on point, Citizens Bank of Md. v. Strumpf, 516 US 16 (1995)  Section 542(b) of the Code, which concerns turnover of property to the estate, requires a bankrupt’s debtors to “pay” to the trustee (or on his order) any “debt that is property of the estate and that is matured, payable on demand, or payable on order . . . except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor. ” 11 U. S. C. § 542(b)

All financial institutions have a policy of freezing accounts if debtor owes them money.  Wells Fargo and most credit unions will freeze the debtor’s bank account even if the debtor does NOT owe any money to that bank or credit union.  Advice to all clients of this office – do not bank at Wells Fargo if you are going to file bankruptcy.

9th Circuit BAP recently held that merely freezing a debtor’s bank account holding funds that had been garnished by a judgment creditor did not violate the automatic stay

This decision was based on the United States Supreme Court’s ruling last year in City of Chicago v. Fulton, holding that retention of repossessed vehicles that were possessed before a bankruptcy was filed did not violate the automatic stay.

In In re Stuart, BAP No. AZ-21-1063-FLS Bk. No. 2:19-bk-05481-BKM (11-10-21) After the City of Scottsdale garnished three of his bank accounts, debtor Mark E. Stuart filed a chapter 13 petition. Mr. Stuart argued that the automatic stay required the City to lift the garnishment immediately. Relying on City of Chicago v. Fulton , ––– U.S. ––––, 141 S. Ct. 585, 208 L.Ed.2d 384 (2021), the bankruptcy court ruled against Mr. Stuart. Mr. Stuart appeals, arguing that Fulton is inapplicable to this case and that the City engaged in “acts” that violated multiple subsections of § 362(a).

Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101 -1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure.

The bankruptcy court correctly held that the City did not violate the automatic stay. We AFFIRM. We publish to explain the effect of Fulton on a prepetition bank account garnishment.


Wells Fargo freezing bank accounts upheld by 9th Circuit:

In re MWANGI and MWICHARO vs Wells Fargo Bank Bk.No. 12-16087 (9th Cir Ct Appeals) The panel affirmed the district court’s affirmance of the bankruptcy court’s dismissal of two chapter 7 debtors’ adversary proceeding against a bank that placed a “temporary administrative pledge” on their accounts after it discovered that they had filed a bankruptcy petition. We hold that property immediately revests in the debtor when the property is deemed exempt under Nevada Revised Statutes §21.090(1)(g). The Debtors cannot allege a plausible injury under § 362(a)(3)based on the operation of WellsFargo’s administrative pledge before the account funds revested because the Debtors had no right to possess or control the account funds during this period. Similarly, the Debtors failed to allege a plausible injury under § 362(a)(3)based on the operation of Wells Fargo’s administrative pledge after the account funds revested because § 362(a)(3) applies only to estate property.We therefore conclude that the district court properly affirmed the bankruptcy court’s judgment of dismissal. AFFIRMED.

No. 09-24057-BAM (9th Cir. BAP NV-09-1408-DHPa) The bankruptcy court erred when it determined that Wells Fargo did not exercise control over property of the estate when it placed its administrative freeze on Appellants’ account funds. Appellants have standing to seek sanctions against Wells Fargo pursuant to § 362(k) for willful violation of the stay with respect to their interest in estate property. We REVERSE and REMAND to the bankruptcy court for further proceedings in light of our conclusions herein. See also, Zavala and Catbagan vs Wells Fargo, case number 10-91718-E-7, E.D. CA

Creditor files complaint or moves for judgement after bankruptcy filed – attorney must take immediate affirmative action to undo the stay violation. A motion in the civil court to vacate the judgment is a starting point.  See Sternberg v. Johnston  (9th Cir. Nos. 07-16870 & 08-15721)

In re Anderson, (Bkrtcy.S.D.Iowa) July 13, 2010: Debtor Protections – Creditor’s conduct in repeatedly contacting debtor in violation of the stay warranted punitive damages of $10,000.00. The Chapter 7 debtor-husband was entitled to an award of punitive damages in the amount of $10,000.00 as a result of a creditor’s conduct in continuing its collection efforts postpetition, in willful violation of the automatic stay. The creditor, an entity with an extremely large volume of bankrupt accounts that was sophisticated in the industry, contacted the debtor regarding the debtors’ credit card account several times, even after it was given notice of the debtors’ bankruptcy filing and despite the fact that the debtors’ counsel provided the creditor with written verification of the filing and with requested documentation. Although the creditor was informed repeatedly of the filing, it ignored this information without considering the possibility of computer error or initiating follow-up with the debtors’ counsel, thereby engaging in egregious misconduct. The failure of the creditor to take any initiative to check the accuracy of its database’s information rose to the level of total disregard of the debtor’s right.

What Damages Is a Debtor Entitled to for a Creditor’s Violation of the Automatic Stay, After Sternberg v. Johnston? Last October a Ninth Circuit panel upset a series of the circuit’s Bankruptcy Appellate Panel precedents and what had appeared to be the Ninth Circuit’s own precedents by greatly limited the attorney fees which a debtor could receive for a creditor’s “willful violation” of the automatic stay under §362(k).

Then on Monday, February 8, in response to petitions for a panel rehearing and for a hearing en banc, the panel issued an order amending its earlier opinion by adding to it one clarifying footnote. It emphasizes that the opinion focuses only on the damages permitted under §362(k), leaving open “the availability of contempt sanctions, including attorney fees, for violation of the automatic stay, where otherwise appropriate.” The footnote points to the 2003 Ninth Circuit opinion, In re Dyer, 322 F. 3d 1178 (9th Cir. 2003), for guidance on this civil contempt authority of the bankruptcy court.

What do the combination of the Sternberg v. Johnston and In re Dyer opinions tell us about the damages that a debtor is entitled to after a creditor violates the automatic stay?

  1. Actual Damages: Attorney Fees & Emotional Distress under §362(k) §362(k) states, in pertinent part, that: an individual injured by any willful violation of [the automatic] stay . . . shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.

Attorney Fees Sternberg v. Johnston dealt almost exclusively with the approximately $70,000 in debtor’s attorney fees that the bankruptcy court had awarded under §362(k). The Ninth Circuit panel held that a creditor is liable only for debtor’s “attorney fees related to enforcing the automatic stay and remedying the stay violation.”

The debtor could NOT recover his or her attorney fees “incurred in prosecuting the bankruptcy adversary proceeding in which he pursued his claim for those damages.” CLICK HERE FOR MORE STORY

In re McMahon, 129 F.3d 93, (Utility could apply deposit against debtor’s unpaid bill for prepetition services without violating the automatic stay since the application was a recoupment).

Does the automatic stay stop this action? The stay does not apply to administrative proceedings so it is possible that a realtor would lose her license and that the automatic stay does not prevent it. You could try to argue that it is a “back door” collection action. See In re Games, 213 BR 773 (Bankr. ED Wash, 1997) where the Court held that the automatic stay bars revocation of a driver’s license for failure to pay civil fines if the revocation constitutes a collection effort). BUT see In re FCC 217 F3d 125 (2nd Cir., 2000) where the automatic stay does NOT preclude the FCC from re-auctioning a spectrum license when the debtor failed to make timely payments.

40235 WASHINGTON ST. CORP. v. LUSARDI (05/23/03 – No. 01-56644/56801) (9th Cir) Bankruptcy Code section 549(c) does not create an exception to the automatic stay provision, section 362(a), and Cal. Rev. & Tax. Code section 3728 is preempted by the automatic stay provision.

ALLEN v. ALLEN (01/11/02 – No. 00-35528) (9th Cir. Ct App) Marital dissolution proceedings relating to spousal support are not subject to the automatic stay provisions of 11 USC 362(b)(2)(A)(ii).

MARRIAGE OF SPRAGUE (01/09/03 – No. G030108) (CA) A creditor must obtain relief from an automatic bankruptcy stay to pursue a family law matter in state court, when the family law matter is a core bankruptcy proceeding.

Family Court Bankruptcy Checklist

Scope of Automatic Stay Issued by Filing Bankruptcy

(provided by Hon. Bruce Cohen, 11.2020)

ESKANOS & ADLER, P.C. v. LEETIEN (11/07/02 – No. 01-56203) (9th Cir Ct App) 11 U.S.C. section 362(a) of the Bankruptcy Code imposes an affirmative duty to discontinue post-petition collection actions, and sanctions are appropriate under section 362(h) where a collection agent willfully violated an automatic stay after receiving notice of a bankruptcy petition. 11 U.S.C. section 362(a) of the Bankruptcy Code imposes an affirmative duty to discontinue post-petition collection actions, and sanctions are appropriate under section 362(h) where a collection agent willfully violated an automatic stay after receiving notice of a bankruptcy petition.

In re Boring, 346 B.R. 178 (Bkrtcy.N.D.W.Va. 2006) AUTOMATIC STAY WAS TERMINATED 30 DAYS AFTER PETITION WAS FILED WHERE DEBTOR WHO WAS CURRENT ON CAR PAYMENTS DID NOT SELECT ANY AUTHORIZED OPTION ON STATEMENT OF INTENTIONS; OPTION TO RETAIN AND KEEP CURRENT WAS NOT AUTHORIZED BY THE CODE § 362(h)(1), § 521(a)(2)(A) The Chapter 13 debtor filed a statement of intentions with regard to her motor vehicle, but selected neither the option to redeem, nor to reaffirm, nor to surrender the vehicle, but instead to retain and keep the payments current (i.e., a “ride-through”). Court ruled that this failed to satisfy requirements of § 362(h)(1) and stay was terminated 30 days after case was filed.

The creditor asserted it had a right under § 521(d) to repossess the vehicle, notwithstanding any general policy negating the effect of a “default on filing” clause in the contract. The court held that since the automatic stay was terminated, the creditor was free to exercise whatever rights it may have under non-bankruptcy law, and declined to rule on whether the creditor in this case had the right to repossess the car where the payments are current.

In re Moon, NV-20-1144-BTaF, NV-20-1155-BTaF (9th Circuit, Jan 07,2021)  Management Services, LLC (“Rushmore”) willfully violated the automatic stay with its postpetition collection efforts against chapter 131 debtors Willie Moon and Adnette Gunnels-Moon. The court awarded the Moons compensatory damages of $100,742.10, which included $100,000 for Willie’s emotional distress, and $200,000 in punitive damages. The court declined to award damages for Rushmore’s violation of the discharge injunction, because the Moons had not established when Rushmore became aware of the discharge order. Those rulings are the subject of another appeal.

Thereafter, the court awarded the Moons their attorney’s fees and costs of $67,007.94. It declined to award the Moons a fee enhancement. Rushmore now appeals the fee award; the Moons appeal the court’s denial of their request for a fee enhancement. We AFFIRM in part, and VACATE and REMAND in part.

We agree that the Moons are entitled to the attorney’s fees and costs they incurred for prosecuting a damages claim against Rushmore for its willful violation of the automatic stay under § 362(k)(1). However, the bankruptcy court erred by failing to state the reasons for the fee award. In addition, in light of our reversal of the damages award to Willie and our remand of the punitive damages award, it is appropriate to allow the bankruptcy court to reconsider the attorney’s fee award in all respects.

Mary Beth Mantiply v.Richard D. Horne, Case No. 16-16789 (11th Circuit, Dec. 5, 2017). When a person takes an action against an individual debtor in bankruptcy in violation of the automatic stay of Section 362(a) the debtor is entitled to recover damages under Section 362(k)(1) to include costs and attorneys’ fees. Question – are the fees awarded limited to those incurred in ending the stay violation, or do they also include the fees incurred in pursuing the damage award, including defending the award on appeal (in this case multiple appeals).

The 11th Circuit held, as a matter of first impression, that nothing in Section 362(k)(1) limits the scope of the attorneys’ fees to solely ending the stay violation. Instead, the broad language of the statute, permits recovery of fees incurred in stopping the stay, pursuing damages for the violation and defending the judgments on appeal.  Therefore, the initial award of fees and costs of $41,714 ballooned to $214,240.03.

OCWEN Loan Servicing v. Marino, Nos. 16-1229, 16-1238 (B.A.P. 9th Cir. Dec. 22, 2017).  Continuous confusing contact with the discharged debtors by the mortgage servicer was appropriately sanctioned at $1,000 per violation notwithstanding the servicer’s formulaic and contradictory disclaimers in some of the correspondence.

Debtors, Christopher and Valerie Marino, surrendered their real property in their chapter 7 bankruptcy. After they received their discharge in June, 2013, the court granted the mortgagee relief from the automatic stay and closed the case. From June, 2013, through April, 2015, OCWEN, as servicer for the mortgagee, sent nineteen letters stating the amount owed on the debt as the “amount you must pay,” and providing payment due dates. Some of the letters contained the disclaimer that, “if you have received a discharge in bankruptcy, this notification is for informational purposes only and is not intended to collect a pre-petition or discharged debt.” OCWEN also made approximately one hundred calls to the Marinos seeking payment on the discharged debt.

Chapter 7 debtors Christopher Michael Marino and Valerie Margaret Marino sought sanctions against creditor Ocwen Loan Servicing, LLC (“Ocwen”) for its violation of the discharge injunction. The bankruptcy court held a trial and awarded the Marinos $119,000 – one thousand dollars for each improper contact.
On appeal Ocwen argues that the bankruptcy court erred because its correspondence with the Marinos was in compliance with state or federal law. It also contends that the court improperly considered telephone calls, which were not the subject of the motion and not supported by evidence, and that there was no evidence of injury to the Marinos. We discern no error and AFFIRM

In re Taggert: The panel affirmed the Bankruptcy Appellate Panel’s opinion reversing the bankruptcy court’s order entering contempt sanctions against creditors for knowingly violating the discharge injunction in a Chapter 7 case. The panel held that the creditors did not knowingly violate the discharge injunction because they had a subjective good faith belief that the discharge injunction did not apply to their state-court claim for post-petition attorneys’ fees. The creditors’ subjective good faith belief, even if unreasonable, insulated them from a finding of contempt. The panel concluded that it therefore need not reach the creditors’ cross-appeal from the district court’s holding that they violated the discharge injunction.

A 362(k) Claim May Be Brought Without Reopening the Bankruptcy, Circuit Says

Healthcare Real Estate Partners LLC v. Summit Healthcare REIT Inc. (In re Healthcare Real Estate Partners LLC), 18-3267 (3d Cir. Oct. 22, 2019). Section 362(k) creates a private right of action that may be maintained even after dismissal of the underlying bankruptcy, the Third Circuit says.

Joining several other circuits, the Third Circuit ruled that an action under Section 362(k) to recover damages for a willful violation of the automatic stay may exist independent of the underlying bankruptcy case. Indeed, the appeals court said, Section 362(k) creates a private right of action that may be maintained without reopening a closed or dismissed bankruptcy case.

In re Orlansky, 9th Cir BAP, 4/18/23, Rocket Mortgage filed a proof of claim for $52.21 (chapter 13) based on a projected escrow shortage.  Rocket also filed a Notice of Postpetition Mortgage Fees asserting a claim for attorney’s fees of $950 for filing its proof of claim and reviewing Debtors’ chapter 13 plan.  In its monthly billing statements, Rocket listed in the “Total Payment Amount” of the monthly billing statements the $950 amount as an “Advance” and included it in the total amount due on the statement due date.  Rocket argued that the statement contained its usual disclaimer that the statements were provided to Debtors for “informational purposes,” not as an “attempt to collect a debt”.

The court held that Rocket Mortgage violated the automatic stay by including on the Debtors’ billing statements $950 for attorney’s fees associated with the bankruptcy. The court rejected the argument that the included disclaimer (“for informational purposes”) created an exception to the automatic stay. But the disclaimer was undercut by the substance of the statements, which clearly indicated that the fees were not being treated as prepetition arrears but rather as part of ongoing regular payments paid outside the plan pursuant to the monthly statement.  Debtors reasonably felt pressure to pay the fees so that they could remain current with their mortgage payments.

The court found that by including this arrears in the Debtors’ regular monthly payments instead of through the plan as part of its claim, Rocket attempted to collect a prepetition debt outside the bankruptcy process. Rocket stepped over the line, and its billing statements violated the stay.

Supreme Court decides that nunc pro tunc cannot create the fiction of an action that the court did not actually take

Roman Catholic Archdiocese of San Juan v. Acevedo Feliciano, 140 S. Ct. 696, 206, L. Ed. 2d (Feb. 24, 2020). In Acevedo, the Supreme Court ruled in February that a nunc pro tunc order can only memorialize an action that the court actually took at a previous time but was not officially recorded. In other words, nunc pro tunc cannot create the fiction of an action that the court did not actually take.

Acevedo raises this question: Are bankruptcy courts now prohibited from annulling the automatic stay?

In re Telles, 20-70325 (Bankr. E.D.N.Y. April 30, 2020) Bankruptcy Judge Robert E. Grossman of Central Islip, N.Y., appeared to hold that annulling the automatic stay, or modifying the stay nunc pro tunc, cannot allow a state court order to stand if it was entered in violation of the automatic stay.

The debtors filed six chapter 13 petitions and lived rent-free for five years.

In re Oya v Wells Fargo, BAP No. SC-19-1095-BKuL (9th Circuit, Oct 18,2019) Not Published.  BAP for 9th Circuit affirmed ruling of bankruptcy court (SD Cal.) retroactively annulling automatic stay after creditor with notice of bankruptcy proceeded with foreclosure sale. Bankruptcy court appropriately annulled stay based on debtor repeatedly and serially filing bare-bones bankruptcy cases for the obvious purpose to prevent foreclosure. Debtors had not made a mortgage payment for over four years, and bankruptcy court did not abuse discretion after properly weighing factors under 9th Circuit case law.

Ritzen Group, Inc. v. Jackson Masonry, LLC, 18-938, US Supreme Court, 1/14/20)

Ritzen sued Jackson in Tennessee state court for breach of contract. Jackson filed for Chapter 11 bankruptcy. Under 11 U.S.C. 362(a), filing a bankruptcy petition automatically “operates as a stay” of creditors’ debt-collection efforts outside the bankruptcy case. The Bankruptcy Court denied Ritzen’s motion for relief from the automatic stay. Ritzen did not appeal but filed a proof of claim, which was disallowed. Ritzen then challenged the denial of relief from the automatic stay. The district court rejected Ritzen’s appeal as untimely under 28 U.S.C. 158(c)(2) and Federal Rule of Bankruptcy Procedure 8002(a), which require appeals from a bankruptcy court order to be filed “within 14 days after entry of [that] order.” The Sixth Circuit and a unanimous Supreme Court affirmed. A bankruptcy court’s order unreservedly denying relief from the automatic stay constitutes a final, immediately appealable order under section 158(a). Adjudication of a creditor’s motion for relief from the stay is a discrete “proceeding” that disposes of a procedural unit anterior to, and separate from, claim-resolution proceedings. The order can have large practical consequences, including whether a creditor can isolate its claim from those of other creditors and proceed outside bankruptcy. Rather than disrupting the efficiency of the bankruptcy process, an immediate appeal may permit creditors to establish their rights expeditiously outside the bankruptcy process, affecting the relief awarded later in the bankruptcy case.

Are Pre-Petition Waivers Enforceable?

Some creditors will include prepetition stay waivers in commercial workout documents, with the goal of having the debtor waive the protection of the automatic stay in a future bankruptcy.  But some creditors do not include that language assuming that the Bankruptcy Code bars on some so-called ipso facto clauses – contractual clauses that make a future bankruptcy a trigger for certain contractual events or results in favor of the non-debtor party. Don’t assume that this contractual provision is unenforceable just because it improves a creditor’s rights in the event of a future bankruptcy. The Bankruptcy Code, however, prohibits such clauses only in a few situations, none of which relate to the automatic stay.

Is the waiver enforceable in subsequent bankruptcy cases? The answer is “maybe,” and more specifically may depend upon which bankruptcy court is involved. Various courts and authors have attempted to categorize the various approaches used by courts, but this is not an easy task given the wide variety of prepetition facts and procedural settings involved.

Know your court – some courts hold that prepetition automatic stay waivers are unenforceable per se, and some courts reach the opposite conclusion (that they are not unenforceable per se). Further, all courts appear to reject the proposition that such waivers are self-executing without any need for court approval.

In re Orchard Hill Baptist Church Inc., Chapter 11 Case No. 19-10897-WHD (Bankr. N.D. Ga. Oct. 28, 2019). “Judge W. Homer Drake of the Northern District of Georgia Bankruptcy Court entered an order granting a bank assignee’s motion for relief from the automatic stay.  In granting the creditor relief from the automatic stay, the court placed special significance on waiver language contained within a prior forbearance agreement between the parties. Specifically, the waiver provided that in the event that a petition for relief is filed by or against the debtor, the debtor would not oppose any motion filed by the lender requesting relief from the automatic stay.

In determining whether to enforce the waiver, the court considered four factors. First, the court found that the debtor, being a sophisticated borrower, agreed to the waiver language contained within the forbearance agreement and was ultimately bound by it. Second, the court found that the waiver was adequately bargained for at the time the parties entered into the forbearance agreement. Third, the court found that no other parties would be harmed by the enforcement of the waiver, as the debtor had few other creditors, all of whom had been silent in the case. Finally, the court found that the debtor’s proposed plan was not financially feasible, as the debtor still had made no payments on its debt and failed to show how it would be able to fund its plan. Based on these factors, the court concluded that the waiver was enforceable.”  Author: Adams and Reese

automatic stay

Bankruptcy Court Upholds Foreclosure Sale That Occurred Between Bankruptcy Case Dismissal and Subsequent Reinstatement

(reprint from Financial Services Prospective, for educational purposes only) In In re Parker, the debtor filed a petition for bankruptcy relief to prevent a foreclosure sale of her residence. Notably, the debtor failed to file any of the required documents at the time she filed her bare-bones petition. This was the debtor’s fourth bankruptcy filing, and as such, she was familiar with the necessary documents that must be completed and filed in Chapter 13 cases.

The debtor timely filed some, but not all, of the missing documents, and the bankruptcy court thus entered an order dismissing her case. Under section 362(c)(2)(B) of the Bankruptcy Code, at the time a case is dismissed the automatic stay is terminated.

After the automatic stay was terminated, the debtor’s residence was sold in foreclosure to Laurel Valley Development, LLC. Slightly more than a week after the foreclosure sale, the debtor filed a motion for reconsideration of the dismissal. Laurel was not served with notice of the motion, and the court was not advised that the residence had been sold. Ultimately, the court granted the debtor’s motion and reinstated the bankruptcy case.

Ruling similarly as a multitude of other courts, the bankruptcy court determined that vacating an order dismissing a Chapter 13 bankruptcy case does not result in imposing the automatic stay retroactive to the date the case was first filed. Accordingly, the automatic stay was not in place when the foreclosure sale occurred, and the sale is thus valid.

In re Perryman, 9th Cir BAP nc-21-1036-BFS (10/8/21) – continuances and status conferences of state court proceedings do not violate automatic stay, absent more evidence.

Chapter 13 debtor Jerome E. Perryman appeals an order denying his motion for contempt against his former wife, Karen Dal Poggetto. Perryman argued that Dal Poggetto’s requests for continuances and attendance at status hearings in her prepetition state court action were willful violations of the automatic stay. He asserted that Dal Poggetto’s actions constituted substantive pursuit of the prepetition action. Dal Poggetto denied the allegation, asserting that no substantive relief was sought in the stayed state court action, only continuances pending the outcome of Perryman’s bankruptcy case, which did not violate the stay. We agree. The automatic stay does not require a creditor in a prepetition nonbankruptcy court action to dismiss that action once a bankruptcy case is filed. Requesting continuances and attending status conferences do not constitute continuation of the prepetition action for purposes of the automatic stay. Therefore, we AFFIRM.

In re Koeberer, v California Bank of Commerce, 9th Cir BAP 21-1078 (11/18/21) The Ninth Circuit Bankruptcy Appellate Panel held that committing a “technical” violation of the automatic stay does not absolve the creditor of liability for a willful stay violation under Section 362(k). Debtors can pursue for attorney fees and costs.

The court correctly held that the Bank violated the automatic stay and that the Koeberers did not prove their entitlement to actual or punitive damages. But the court erred when it determined that the Koeberers lacked standing and denied attorneys’ fees and costs because the violations were “technical,” without making any finding as to the reasonableness of any of the claimed fees and costs. Accordingly, we AFFIRM most of the court’s judgment, but we VACATE the denial of attorneys’ fees and costs and REMAND for a determination of reasonableness.Even if the chapter 7 debtors were not defendants in the action that violates the stay, the BAP opinion on November 18 also held that the debtors have standing to prosecute a stay violation if the action aimed to collect a claim against the debtors.

In re Legrand, 19-21198, US BK Court, EDC (3/29/22) Winn Law Group and Cavalry Portfolio Services – continued to garnish wages after petition was filed.  Winn was aware of the bankruptcy for months, at some time their client, Cavalry become aware.  Court sanctioned the law firm and Cavalry.  Cavalry instructed Winn to pay the sanctions.  Case details responsibility of both law firm and collection company’s duties to avoid, or correct, contempt actions (either automatic stay or discharge violations).

In re Stuart, BAP No. 21-1063, (9th Cir Ct Appeals, 8-7-23) Mark Stuart appeals pro se from the judgment of the Bankruptcy Appellate Panel (BAP) affirming the bankruptcy court’s order denying his motion for sanctions against the City of Scottsdale (Scottsdale) for a purported violation of the 11 U.S.C. § 362(a) automatic stay. We review de novo, and we affirm.  The Supreme Court has explained that an entity does not violate 11 U.S.C. § 362(a)(3) or exercise control over a bankrupt estate’s property merely “by retaining possession of a debtor’s property after a bankruptcy petition is filed.” City of Chicago v. Fulton, __ U.S. __, __, 141 S. Ct. 585, 589, 208 L. Ed. 2d 384 (2021). That reasoning applies with more force here: Scottsdale was not even in possession of Stuart’s property and thus had no obligation to act affirmatively to facilitate his access to that property.