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VIOLATION OF THE AUTOMATIC STAY:

IMPORTANT: THIS FIRM MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR CURRENT STATUS OF ANY LAW, CASE, ARTICLE OR PUBLICATION CITED HEREIN OR LINKED TO.  WARNING – SOME OF THESE REFERENCES ARE PRE-BAPCPA.

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.

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 FAIR CREDIT REPORTING ACT “FCRA” AND THE BANKRUPTCY CODE

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)

Reorganizations

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.

US SUPREME COURT DECISON: TAGGART

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.

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.

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.

In re Ellis, 339 B.R. 136 (Bkrtcy.E.D.Pa. 2006) DIANE WEISS SIGMUND, Chief Judge BAPCPA TREATS MOTION TO EXTEND STAY DIFFERENTLY AS BETWEEN CERTAIN CREDITOR OR ALL CREDITORS

§ 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.

In re Warneck, 336 B.R. 181 (Bankr. S.D.N.Y., 2006) CECELIA G. MORRIS, Bankruptcy Judge DEBTOR WAS ENTITLED TO EXTENSION OF AUTOMATIC STAY WHERE DEBTORS DEMONSTRATED GOOD FAITH FOR SECOND FILING

BAD FAITH IS PRESUMED ONLY AS TO CREDITOR WHO FALLS WITHIN § 362(c)(3)(C)(ii)

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.

In re Ziolkowski 338 B.R. 543 (Bkrtcy.Conn. 2006) LORRAINE MURPHY WEIL, Bankruptcy Judge. DEBTOR’S ATTORNEY CAN’T RELY ON COURT CLERK TO CALENDAR MOTION TO EXTEND STAY WITHIN 30-DAY DEADLINE § 362(c)(3)

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.

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.

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.

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.

Case discussion: 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.

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

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